Suggested Reading: Dispute Management Guidelines for Visa Merchants
“Dispute Management Guidelines for Visa Merchants is a comprehensive manual for all businesses that accept Visa transactions. The purpose of this guide is to provide merchants and their back-office sales staff with accurate, up-to-date information to help merchants minimizing the risk of loss from fraud and disputes. This document covers dispute requirements and best practices for processing transactions that are charged back to the merchant by their acquirer.” Download the “Dispute Management Guidelines for Visa Merchants” guide.
Merchant Best Practices
The following are tips courtesy of Bank of America Merchant Services.
- Swipe/Dip the card. If the card does not read, follow fallback/manual key entry procedures
- Follow all PCI DSS best practices for imprints and storage of any sensitive cardholder data
- There are common reasons you may have issues obtaining a successful swipe, such as: De-magnetized card; dirty swipe reader; not following through on the swipe
- Follow all terminal prompts. If you receive a decline, DO NOT process the transaction (ask for another form of payment)
- Card-not-present merchants: Obtain AVS & CVV2/CVC2 match
Review Card Security Features
- Compare account numbers, ensuring the account number on the card matches the account number printed on the sales draft (last four digits of the masked account number)
- Ensure that there is a hologram on the front (and possibly back) of the card
- If the card is not signed, request ID and have the cardholder sign the card in front of you. Note: Merchants may ask to see ID as long as it is not a condition of the sale
- The name on the front of the card must match the name on the back
- Unsigned cards or “See ID” provide a false sense of security and are not valid (this is actually printed on the back of the card!)
- If signatures do not match, check ID
Complete the Transaction
- Require the customer to sign the receipt (when applicable; the requirement to sign the receipt is no longer valid if your point of sale system has EMV chip-reading capabilities)
- Deposit the transaction in a timely manner (close the batch at the end of each day, if applicable)
- Retain the sales draft (13 months for Visa/MC, two years for AMEX, three years for Discover)
Transaction Life Cycle
Payment card transactions for card-present merchants have many steps, from initiation to completion:
- Cardholder presents card for payment to the Merchant
- The Merchant processes the transaction request through their POS device that goes to the Acquirer (BAMS for UCSB)
- The Acquirer will transmit that request to the Payment Card Network (Visa/MC/Discover/AMEX)
- The Payment Card Network reaches out to the cardholder’s Issuing Bank (Issuer) and requests approval
- The Issuer will approve or decline the transaction, and send the information back to the Payment Card Network, which then passes it to the Acquirer, and finally back to the Merchant
Card-not-present (e-commerce and MO/TO Merchants)
Transactions take a similar route, with these changes:
- The cardholder enters the payment information into an internet-based payment page on, or connected to, the merchant’s website; or, an employee enters the cardholder’s payment information into an internet-based POS or payment page (using an approved, secure terminal at UCSB)
- The payment information is processed through a Payment Gateway, which passes it to the Acquirer. The rest of the routing is identical to card-present transactions, above.
An authorization is a request for verification that the cardholder’s account is in good standing with funds available at the time of the request. For most merchants, the authorization is obtained during the sale transaction. It does not warrant that the person presenting the card is the rightful cardholder, nor is it a promise or guarantee the sale will not be subject to a chargeback. The following are some examples of responses received from the card issuers.
- Approved - Transaction is approved by issuer/company that governs the payment card
- Referral - Message indicating that the merchant must call their authorization center and follow instructions provided. Note: When a referral response is received the merchant should not attempt additional authorizations on the same card. The merchant should call the authorization center to receive a voice approval code to complete the transaction. A voice authorization should only be requested when a referral response is received. If the merchant receives an unfavorable response, another form of payment should be requested.
- Declined - Transaction was not approved by issuer/company that governs the payment card. The transaction should not be completed. Request another form of payment. Note: If a sale is declined, do not pursue alternative measures with the same card to obtain approval. Instead, request another form of payment. Merchants accepting and processing transactions with multiple authorizations are subject to chargebacks, Payment Card Company fines and/or cancellation of their processing agreement
- Pick Up Card - Card issuer wants to recover the card. Do not complete the transaction. Ask for another method of payment and if you feel comfortable recover the card from the cardholder. Note: Follow your internal procedures for card recovery
Chargebacks and Retrieval Requests
The following information is excerpted from Visa’s “Chargeback Management Guidelines for Visa Merchants” (https://usa.visa.com/dam/VCOM/download/merchants/chargeback-management-guidelines-for-visa-merchants.pdf)
What is a Chargeback?
A “chargeback” provides an issuer with a way to return a disputed transaction. When a cardholder disputes a transaction, the issuer may request a written explanation of the problem from the cardholder and can also request a copy of the related sales transaction receipt from the acquirer, if needed (“Retrieval Request”). Once the issuer receives this documentation, the first step is to determine whether a chargeback situation exists. There are many reasons for chargebacks - those reasons that may be of assistance in an investigation include the following:
- Merchant failed to get an authorization
- Merchant failed to obtain card imprint (electronic or manual)
- Merchant accepted an expired card
When a chargeback right applies, the issuer sends the transaction back to the acquirer and charges back the dollar amount of the disputed sale. The acquirer then researches the transaction. If the chargeback is valid, the acquirer deducts the amount of the chargeback from the merchant account and informs the merchant.
Under certain circumstances, a merchant may re-present the chargeback to its acquirer. If the merchant cannot remedy the chargeback, it is the merchant’s loss. If there are no funds in the merchant’s account to cover the chargeback amount, the acquirer must cover the loss.
Proper Disclosure is Critical in Preventing Chargebacks
As a merchant, you are responsible for establishing your merchandise return and refund or cancellation policies. Clear disclosure of these policies can help you avoid misunderstandings and potential cardholder disputes. Visa will support your policies, provided they are clearly disclosed to cardholders. For face-to-face or eCommerce environment, the cardholder must receive the disclosure at the time of purchase. For guaranteed reservations made by telephone, the merchant may send the disclosure after by mail, email or text message.
Disclosures for Card-Present Transactions
For card-present transactions, Visa will accept that proper disclosure has occurred before a transaction is completed if the following (or similar) disclosure statements are legibly printed on the face of the transaction receipt near the cardholder signature area or in an area easily seen by the cardholder. If the disclosure is on the back of the transaction receipt or in a separate contract, it must be accompanied by a space for the cardholder’s signature or initials.
Disclosures for Card-Not-Present Transactions
- Phone Order - For proper disclosure, your refund and credit policies may be mailed, emailed, or texted to the cardholder. As a reminder, the merchant must prove the cardholder received or acknowledged the policy in order for the disclosure to be proper.
- Internet or Application - Your website must communicate its refund policy to the cardholder in either of the following locations:
- In the sequence of pages before final checkout, with a “click to accept” or other acknowledgement button, checkbox, or location for an electronic signature, or
- On the checkout screen, near the “submit” or click to accept button
- The disclosure must not be solely on a link to a separate web page
Storage of Receipts (electronic or paper)
Storage of receipts varies by card brand, and merchants should be prepared to produce timely copies of them upon request by our acquirer. Current storage requirements are:
- Visa & MasterCard - 13 months
- American Express - Two years
- Discover - Three years