Why You're Susceptible to a Bank Chargeback

Previously, the only time businesses received credit card chargebacks was when a customer was unhappy with a product or service. Most business owners have, understandably, never had a chargeback. It has always been understood that if you provide good service and quality products, your customers will be happy.

But times they are a-changin’! Banks are now issuing credit card chargebacks if they determine an issue with a transaction, even without your customer's consent. Now you’re probably thinking, “But how can banks get away with that?” Well, since the liability shift took place, there’s a new type of chargeback related to EMV transactions.

If you don’t handle EMV transactions correctly, then you’re at risk of encountering a bank chargeback. Your funds for the legitimate transaction will be withdrawn, letting your customers get your products and services for free. This is a huge issue for every business owner, so pay attention.

Here are three payment practices that make you vulnerable:

1. You already have an EMV chip card reader, but it’s not activated or doesn’t work. This is a big problem. You have the right technology and the best security measures at your fingertips, but you're not using them. If you are swiping chip cards, your business will automatically lose any credit card chargeback dispute related to EMV transactions.
2. You swipe chip cards when you have a functioning EMV device. EMV devices shouldn’t even allow chip cards to be swiped. The technology should be smart enough to detect the type of card being used and how the payment should be run. However, if you’re using a subpar device, it may let you swipe chip cards. If that’s the case, you will lose a bank chargeback disputes by default, even if your customers validate the charges.
3. You don’t have an EMV-capable device and swipe a magnetic stripe card counterfeited from a chip card. If this happens, your business is liable. Without the technology of an EMV device, an old-school terminal isn’t able to recognize the card type or require it to be inserted. In the case of fraud, the liability will fall on your business for not having the correct technology to detect the fraudulent charge.

Stay Ahead of a Bank Chargeback

If at this point you’re still thinking, “But in 25 years of business, I’ve never gotten a credit card chargeback,” then first, congratulations. However, your winning streak may come to an end if you don’t upgrade to an EMV-capable device. Effective chargeback prevention does require multiple layers of security, but embracing the new chip-based payment system will give your business a running start in the right direction. Survive the liability shift, beat the banks and don’t get hit with this new type of chargeback.

Have you been swiping chip cards because you don't have a chip terminal, or because your chip terminal is inactive? Tell us about your experience with chip cards and if you've ever had a bank chargeback in the comments section below!