Prevent payment disputes
About payment dispute prevention
With every card payment you take, you and your customer are entering into an agreement, meaning that you can be held liable for the payment amount if your customer disputes the payment. Cardholders can initiate a payment dispute, also known as a chargeback, by asking their bank to reverse the charge. But you have a better chance of avoiding disputes—and when they do happen, of convincing your customer’s bank that you’re in the right—by following a few best practices.
Before you begin
You can strengthen your Square account — with most of the steps below — from your Square Dashboard. Square recommends precautions to lower your risk when you accept credit card payments.
Make your business details and policies clear on all payments
Make sure your customer understands the details of the charge may prevent them from filing disputes later. This helps to ensure:
- Your customer knows what they are being charged for
- How they can contact you in the event of issues
- What their rights are for any refunds or cancellations
Add your phone number, address, website and social media pages to your receipts. This will help a customer reach out to you directly if something goes wrong with a sale, rather than immediately filing a dispute with their bank. You can also use Square’s customer engagement tools.
If your business name isn’t saved correctly within the Square Dashboard, or doesn’t reflect the types of goods or services you provide, it may confuse your customer when they review their bank statement. When they see a name they don’t recognise, they’re more likely to call their bank and initiate a dispute.
For example, it’s best not to use your personal name as your business name, because customers will be looking for your business name on their statement. If you don’t have a business name, use your service type followed by the name of the city where you provide the service.
Provide a clear and accurate description of what you sold for every transaction. Details on what was purchased are a must-have to win a dispute. This can also help refresh a customer’s memory and prevent a dispute from happening in the first place.
If writing descriptions for each transaction isn’t feasible for your business, create an item library. Then, when you process a sale, select the items or services sold and they’ll be added to the receipt.
Write out and present your return, refund and cancellation policies on your receipts or any other agreements made at the point of sale, such as a contract or invoice. Presenting a no returns/refunds/cancellation sign at the point of sale or on your website is not sufficient to verify your business’s policies. You’re more likely to avoid or win a dispute if you can show that the customer signed a printed receipt or invoice in which these policies are clearly explained. Learn how to customise receipts.
Get a signed acknowledgement that the goods or services were delivered to the customer with a goods and services confirmation that can be sent before or after an invoice is paid. It’s helpful to walk through what was completed with your customer before you send this confirmation so that they know what to expect.
Use Square Feedback to collect comments from your customers about their purchase. If a customer has a problem with a sale, they can reach out to you directly from their digital receipt. You may be able to respond, issue a refund or resolve the issue without ever having to enter the dispute process.
Accept card-present transactions safely
Purchases made when your customer and their payment card are present are less likely to be disputed than a payment made remotely. Follow the practices below to minimise the risk of disputes when making card-present transactions.
EMV (chip) cards are more secure than traditional magstripe cards, so card issuers have introduced regulations to make sure sellers correctly process chip cards whenever possible.
You are automatically liable for any fraudulent transactions, if you swipe a chip card rather than using a chip reader.
If the card is physically present for a transaction, always insert the chip or tap the card with Square hardware. If it is not a chip card, swipe the magstripe stripe and chip card through the magstripe reader on Square Terminal, Square Stand (1st generation) and Square Register.
A physical or digital receipt is a record of the transaction for both you and your customer. Sending digital receipts can also help a buyer recall what a charge was for. In the event of a dispute, we can use a receipt to challenge the dispute with the customer’s bank. Instead of using a custom amount, ensure that the receipt is itemised to indicate each good or service purchased, along with the quantity.
Accept card-not-present transactions safely
With eCommerce or Virtual Terminal payments, naturally, the customer doesn’t have to be physically present. Since you can’t physically verify that the person making the transaction is the cardholder, we recommend taking the steps listed below to minimise the risk of payment disputes.
If you are shipping a product, make sure to keep the tracking information and a delivery receipt. For large orders, require a signed confirmation of delivery.
If you provide a service, be sure to prepare a signed and dated document outlining the services provided and the buyer acknowledging they have received the services, like an itemised invoice or confirmation from the seller’s email. Another example of proof of service is to ask your customer to review and sign a work order and keep it for your records. If you accept payment after completion of service, be sure to note the service date and completion status on the signed document.
To strengthen your case, you should provide evidence showing your customer acknowledged and signed your business’ terms and conditions at the time of payment. A signed and dated contract that shows full terms and conditions of a sale is especially helpful in defending against payment disputes.
With Square Contracts, you have the ability to create and send contracts right from your Square Dashboard. The available contract templates are designed to be customised for your unique business needs — empowering you to establish clear agreements with your customers, secure digital signatures and avoid potential payment disputes.
Disclaimer: Square is not a law firm, an attorney or a professional advisor in any industry. Square provides this template to individuals who choose to prepare their own contractual documents and does not constitute legal advice. See Square Contracts Terms and Conditions.
Get to know your customer before completing a large transaction. Verify your customer’s identity, billing address and business (if applicable) prior to processing a high-ticket item or sizeable order. Search social media or search engines to seek the legitimacy of a customer or ask for a government-issued ID and match the name on the photo ID to the name on the payment card.
If you’re shipping an item, check whether the billing and shipping postal codes match. If they don’t, ask your customer why. Their answer should make practical sense. If it doesn’t, don’t accept the payment.
To find out more about accepting credit card payments, check out our Square Community.
Accept invoices and payment links safely
Invoices and payment links are payment methods where the customer doesn’t have to be physically present, but they do enter their payment details themselves. Since you can’t physically verify that the person making the transaction is the cardholder, we recommend taking the steps listed below to minimise the risk of payment disputes.
Goods and services confirmation is recommended for high-value invoices, especially if your customer changes their mind at a later stage. It greatly increases your odds of winning a chargeback dispute on an invoice payment. Charging a payment method on file is not available for invoices that have goods and services confirmation enabled.
To use this feature when sending an invoice, toggle on Goods and services confirmation and click Yes after reviewing the message.
- In order to pay for an invoice, your customer is required to confirm they accept the goods and services with satisfaction. This only covers final payments taken after goods and services have been delivered.
- The confirmation will appear on the paid invoice as accepted.
Doing this ensures that the customer accepts and recognises each payment that is processed, reducing the likelihood of a dispute. If you want to keep a copy for your records, you can always copy your own email address or phone number to the message you send.
Your customer has a few attempts to pay an invoice. For your protection, Square cancels an invoice if the customer reaches a maximum number of attempts. If you receive this message, we strongly recommend verifying your customer’s identity, seeking an alternate method of payment such as cheque or cash, or declining to complete the sale.
Accept high-volume payments safely
When you accept multiple payments from the same card holder, it is important to be able to show payment details and authorisation for each payment. You can further protect your business by following the above advice for card present or Card not Present (CNP) transactions for each payment.
If you’re processing multiple transactions for one item over a period of time, obtain a signature for each individual payment. In the item description, clarify that the payment is an “instalment payment” and include full details on what was purchased. This ensures that you’re on the same page as your customer and protects you if they ever claim that any of the transactions were unauthorised.
If you have a recurring charge with a client, acquire written cardholder permission to periodically charge for the recurring services or goods. On the written agreement make sure to include:
- transaction amounts
- frequency of the charges
- duration for which cardholder permission is granted
- cardholder’s signature
If you wish to refund a payment, always issue the refund directly back to the payment card. If you must provide a refund via cash, cheque or money order, make sure to obtain a signed agreement that your customer received the refund.
Never have your customer sign a statement waiving their right to dispute the transaction with the card issuer. This is a card network violation and will impact your chances of winning a payment dispute if one occurs. It’s best practice to set expectations with your customers and ensure they understand how transactions with your business work.