With every card payment you take, you and your customer are entering into an agreement. This means that you can be held liable for the amount of the payment if a chargeback or dispute related to the transaction were to occur.
By following these guidelines, you may be able to reduce the likelihood of receiving a chargeback and you'll be more prepared if you do receive one.
Best Practices for Keyed-In Payments
Keyed-in payments are inherently riskier because the customer does not have to be physically present. Fortunately, there are some simple precautions that you can take to guard against disputes.
Request Card Information
Make sure a customer can provide the name on the card, the billing address, card number, expiration date, and the CVV code on the back of the card.
Obtain a Signature
If you are processing a large transaction, have your customer sign an invoice, a credit card authorization form, or a contract that authorizes the payment and outlines your refund policies. Once signed, make sure to keep them on file. If the customer isn't present for the sale, be sure to write why on the signature screen, for example, write "phone auth" or "Internet order."
If you are shipping a product, make sure to keep the tracking information and a delivery receipt. For large orders, require a signature confirmation at delivery.
Know Your Customer
Get to know your customer before processing a large transaction. Verify your customer’s identity, billing address, and business if applicable. Do a Google search or ask for a government-issued ID. We recommend matching the name on the ID to the name on the payment card. These precautions are highly recommended for invoice payments.
Match Billing and Shipping Zip Codes
If you are shipping an item, check whether the billing and shipping ZIP codes match. If they don’t match, ask your customer why. Their answer should make practical sense. If it doesn’t, do not accept the payment. If you have any questions about accepting a payment, always feel free to contact us.
Protect Yourself from Scams and Fraud
Almost every business has the potential to be scammed. It can take months for cardholders to realize that their card is missing or compromised, which means that your business could be liable for fraudulent payments months after they are taken. While Square works hard to protect you from fraud or scams, you are always the first and best line of defense.
Avoid Stolen Card Scams
Some scam artists use compromised credit card information in an attempt to convince you to send them money or goods. These people often place their orders via email or phone to mask their identity.
The scam artist sometimes tries to get you to use part of the credit card payment to pay a special vendor or shipping company. The instructions often involve some sort of irreversible money transfer such as a wire, Western Union, money order, or bank transfer. Never use part of a payment to send money to a third-party vendor or shipping company recommended by your customer.
Recognizing Fraudulent Buyers
Here are some possible signals from buyers that you should look out for when you’re accepting payments.
- Buyer places an order via email or phone.
- Buyer claims to be hearing impaired or in the hospital.
- Buyer places unusually large orders in a short period or insists on expedited shipping/service.
- Buyer requests international shipping.
- Buyer’s credit card is declined.
- Buyer requests an order to be split between multiple credit cards.
- Billing and shipping ZIP codes don’t match.
- Buyer gives special instructions such as paying a third-party vendor, person, or shipping company.
- Buyer has a large order of goods that can be easily resold (e.g. a lot of blank t-shirts).
- Never wire or send money to a third-party at your customer's request (including Western Union, MoneyGram, bank transfer, etc.).
- Never use a third-party delivery service that you're not familiar with. We suggest that you send your goods through a certifiable delivery company (e.g. UPS, Fedex, etc.).
- Ask for additional information, such as some form of government identification.*
- Do not split large orders into multiple small payments.
- Match the billing ZIP code to the credit card’s ZIP code. If they don’t match ask, “Why?” The reason should make practical sense.
- Research your customer and call to confirm orders.
If you suspect fraud, stay calm and let the customer know you can’t accept the sale. Contact us if you have any questions or concerns about a customer.
*Never store cardholder data (such as the credit card number) on any systems (on paper, online, or in an application).
Tips for Processing Payments
If you're processing multiple transactions for the same customer over a period of time, obtain a signature for each individual payment. In the item description clarify that the payment is an “installment payment.”
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
- the duration for which cardholder permission is granted
- the cardholder’s signature
If you wish to refund a customer for a payment, always issue the refund directly back to the payment card. If you must provide a refund via cash, check, 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 network violation and will impact your chances of winning a payment dispute if one occurs. Instead, follow the guidelines in this article to help put you and your customer on the same page regarding expectations for the completion of the transaction.
Surcharges: Individual states have their own rules and regulations regarding surcharges. Learn more about applying a surcharge with Square.
Make Your Receipt Information Recognizable
Add your contact information
Add your phone number, address, website, and social media pages to your receipts. This may help a customer reach out to you directly if something were to go wrong with a sale, rather than file a dispute with their bank.
Publish a refund policy
Make your business name recognizable
Make sure the business name on your receipt is recognizable. This is the name that shows up on a customer’s bank statements. If a customer does not recall a name on their statement, they may be more inclined to file a dispute.
If you do not have a business name or your business name is longer than 35 characters, add a description of what you sell and your location to your business name. For example, if you are a taxi driver in San Antonio, write Taxi - San Antonio, TX.
Write a description of the goods or services you sold
Provide an accurate description of what you sold for every transaction. This can help jog a customer’s memory and prevent a dispute from happening.
If it is too much to write a description for each sale, create an item library. Then, when you process a sale, simply select the items or services sold and they’ll be added to the receipt.
Collect Customer Feedback
Use Square Feedback to collect feedback 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.
Best Practices for Process Card-Present Transactions
Always Insert or Swipe Cards
If the payment card is available, always insert the chip or swipe the mag-stripe card through the reader. A dispute on a inserted or swiped and signed payment has a higher chance of winning than if the card information has been keyed in.
Have Customers Sign on the Signature Screen
Obtain a signature for every swiped transaction. When you do so, make sure the signature on the screen matches the signature on the back of the payment card. If the card is not signed, ask your customer for a government-issued ID and to sign the card. Then match the signature on the government ID to the signature on the payment card. While you can’t require your customer to provide an ID, and requesting an ID doesn’t change your liability for chargebacks, unsigned cards are invalid and should not be accepted.
Always Provide a Receipt
A receipt is a record of the transaction for both you and your customer. A receipt can help a buyer recall what a charge was for, and in the event of a dispute, can help you represent yourself.
Square merchants start off with a per transaction limit of $50,000. If you have general questions regarding large transactions, contact us.
If you would like to accept individual transactions above $50,000 each, you'll need to split the payment into multiple installments. Make sure to record of the receipt number and the total amount charged for each installment. Please note that in order to ensure a secure purchasing environment, we may periodically reach out to customers for additional information regarding their business or transactions.
Note: Merchants who process more than $100,000 annually will be asked to sign a Commercial Entity Agreement, acknowledging that the payments processed are associated with a commercial business.
Although following these guidelines will reduce your chances of receiving a chargeback, there is always a potential risk associated with accepting credit card payments. If a customer does dispute a payment, Square will represent you in the dispute process free of charge, and our team of specialists will use their expertise to help you along the way.
Learn more about the dispute process and how we work with you to build a case.