Chargeback Scam: A Closer Look at Fraudulent Activities
People fall for chargeback scams, which are also called “friendly fraud,” when they use a credit card to buy something online and then call their credit card company to challenge the charge. Some individuals may say they never got the thing or that it wasn’t what they thought it would be.
The store owner loses both the money and the item or service. When businesses fall for chargeback scams, they lose money and may also have to pay fees. Merchants who carefully review sales and look for anything that doesn’t seem right can avoid chargeback fraud.
Top 5 Types of Chargeback Scams You Need to Know
Friendly Fraud
It happens when a customer buys something online and then disputes the charge with their credit card company, saying they didn’t authorise the transaction or didn’t receive the goods or services.
Issue Not as Described
The buyer gets the item they ordered but says it is very different from what the seller said it would be like. They then file a chargeback to get their money back.
Service Not Provided
This scam is similar to the item not stated in that the victim says they paid for a service that, in reality, the merchant never provided.
Card Testing
Scammers use credit card numbers they’ve stolen to make small payments to see if the card is working. They can make bigger illegal purchases once they are sure it is real.
Return Fraud
People buy things to use them, but then they return them for a refund, even though the items aren’t broken or faulty. Chargebacks can happen to the seller.
Top Warning Signs of Chargeback Scams
- Unusual Purchasing
- Rush Orders
- Large Orders from New Customers
- Multiple Failed Transactions
- Unusual Shipping Requests
- Unwillingness to Provide Documentation
- Use of Temporary or Disposable Email Addresses
Tips to protect yourself from Chargeback Scams
Order Check
Always check orders, especially from new customers, to see if they look fishy or are strangely big.
Verify The Address
Use the Address Verification Service (AVS) to make sure the customer’s payment address is correct.
Utilise 3D Secure
To increase security, think about utilising 3D Secure methods such as Verified by Visa or MasterCard SecureCode.
Stay Alert
Keep an eye out for anything that doesn’t seem right, like attempts to make multiple deals fail or requests for quick deliveries.
Verify Contact Info
Make sure the customer’s contact information matches the payment information.
Use Fraud Detection Tools
Avoid falling for scams by using software that finds and stops fraud.
Offer Good Customer Service
Take it away Offering great customer service can help keep complaints and chargebacks from happening.
Keep Records
Keep thorough records of all transactions to help protect yourself against chargeback claims.
Educate Employees
Teach your workers how to spot and deal with activities that seem fishy.
Frequently Asked Questions
Customer service should improve. Customer service can reduce product- or service-dissatisfaction-related chargebacks. Make the return and refund procedures explicit. Use strong fraud-prevention measures.
Filing fake chargebacks can get you in trouble with legal proceedings because it could be seen as fraud.
According to the law, the bank has some business days to look into the claim and decide whether to pay the claimant.