How to Prevent Chargebacks: 7 Proven Tips You Can Implement Immediately

Sep 1st, 2023

Chargebacks Payment Processing Fraud Prevention

Chargebacks are notoriously difficult to deal with for vacation rental companies, but there are a few things you can do to prevent them from taking place. These seven proven tips are easy to put in place and can save you a world of trouble. But first, let’s take a closer look at what a chargeback is and when you might face one.

A chargeback is a demand from a credit card provider for you to make good on the loss of a disputed transaction.

A customer initiates a conversation with their credit card company when they are upset with the charges from your business. In turn, the bank removes the money from your account. You will receive a written letter and can then present your case for why the money should be returned.

The issuing bank or the card brand will make the ultimate decision on who is right: you or the customer.

If you’re wondering how to prevent chargebacks and the headache associated with them, here are a few strategies that can help.

1. Communication is Key

Communication is crucial at all stages of the process. Oftentimes, communication can prevent the cardholder from initiating a dispute with their issuer and allow property managers to resolve the issue outside of the chargeback process.

Before booking and payment, ensure that the guest's expectations are in alignment with what they will receive. Be truthful and upfront with your guests from the very beginning, such as providing real photos and accurate descriptions. Stock imagery or outdated photos that paint the property in a better light than its current state can set inaccurate expectations in the guest’s head. They may feel slighted when they arrive at a dramatically different location than what was pictured on your website, potentially leading to a “not as described” chargeback.

Furthermore, disclose your cancellation and refund policy and require cardholders to agree to it before processing any payments.

If the guest books online, the best way to do this is include your cancellation and refund policy in your terms of service. Include a "click to accept" button for the guest to agree to the terms before the guest can proceed to payment. If you don't accept online payments, disclose the refund policy by ensuring that the cardholder signs your terms of service with a wet signature, within an inch of each policy you want to protect.

Guests should also know exactly what costs and fees are included in their booking, such as whether you have a surcharge policy for credit card payments. Including a surcharge on the itemized breakdown is required for compliance anyway, so it’s in your best interest to follow all required rules and regulations.

Maintain a clear line of communication throughout the guest’s stay, too. Provide a way for them to contact the property manager and respond promptly to any issues. Ideally, the guest and property manager can work together directly to resolve these issues before they escalate into a chargeback.

2. Understand the Types of Chargebacks

Being knowledgeable about the different types of chargebacks helps you understand your options, address them in the most appropriate way, or implement processes that help you avoid them entirely.

Here are the types of chargebacks that you will likely run into and common methods to avoid them:

Credit not processed: This chargeback usually occurs as a result of a cancelled booking. The guest may have cancelled outside of the policy that you enforce or they may have cancelled and have yet to receive a refund. Documentation proving that the cardholder was informed of and signed your cancellation/refund policy before they made a payment is crucial for this type of chargeback.
Not as described: A not-as-described chargeback means that your guest initiated a dispute because they claimed the product or service they received is not what was advertised. Clear communication, setting guest expectations at booking, promptly addressing any issues that come up during the stay, and documenting every step can help avoid or address this type of dispute.
Technical reasons: Technical reasons are perhaps the easiest to understand and are usually the result of human error. Scenarios that fall under this chargeback category include charges for the incorrect amount, duplicate processing, or an incorrect account number as well as payment by other means. Careful processing, manually reviewing batches, and diligently correcting mistakes can all help rental managers avoid this type of chargeback.
Fraud: True fraud is when someone other than the actual cardholder makes a purchase with that card. Friendly fraud is when cardholders use the dispute process fraudulently to avoid having to pay for a purchase. Cardholder identity authentication at the time of purchase is the best way to avoid true fraud.

Additionally, each credit card company has its own rules that you will need to play by to minimize chargebacks. Familiarize yourself with the rules and processes for each credit card type you accept.

3. Prioritize Guest Satisfaction

If you want to catch complaints early before they become a chargeback, reach out to guests to ensure they are happy. Commit to keeping the property clean, comfortable, and well-maintained to avoid issues that could arise during a guest’s stay. Going the extra mile to provide quality customer service (such as providing some of the amenities on this host checklist) can garner goodwill among guests.

Consider what could negatively impact the guest’s experience. For example, a leaking dishwasher could inconvenience them during their stay and lead to “not as described” chargebacks for the hassle of dealing with a leak and maintenance crews. While some guests may be understanding, others will not.

By keeping up with maintenance, you lessen the risk that a booking will end in a chargeback.

4. Implement Fraud Prevention

Unfortunately, fighting fraud chargebacks is notoriously difficult. The best tactic to avoid them is by having fraud prevention technology in place, such as cardholder identity authentication at the time of purchase.

Proving that the cardholder authorized the booking, whether through identity authentication or a physical signature from the cardholder, can help you prevent true fraud or fight back in cases of friendly fraud.

Your vacation rental or independent hotel payment processor can help with this. Ascent Payment Solutions offers features to protect you from fraudulent transactions, such as PCI compliant processes and identity verification capabilities.

5. Keep Records

Your recordkeeping could save you in the event of a chargeback. Have your team make notes each time they get on a phone call. Keeping maintenance records showing issues were addressed can also help avoid disputes.

Another helpful tip is to make sure that things are signed. When dealing with chargebacks, a wet signature is best but may not always be possible. Do what you can to implement a system that requires a wet signature whenever feasible.

Electronic signatures from your guests agreeing to your terms of service or other documents can be helpful, especially if placed within one inch of the total due and each policy you want to protect (like your cancellation/refund policy). However, electronic signatures do not generally help in situations where the guest claims they didn't authorize the charge, such as fraud.

6. Manually Review Transactions

Manually reviewing your transactions may require valuable time and resources, but it can prove an invaluable tool at avoiding or eliminating chargebacks. This allows you to quickly spot duplicates that are the result of human error in your processing and make the proper corrections. You can also look for multiple attempts and declines by the same person, which can be indicative of suspicious activity or fraud.

7. Respond Quickly

If a guest cancels in accordance with your policy, process their refund quickly to avoid a “credit not processed” chargeback. Always refund the same credit card that was used to make the booking. If the refund to the same card is declined by the issuing bank, follow these instructions.

If you do face a chargeback, do not procrastinate. Respond quickly and provide necessary documentation. Every chargeback has a deadline, and you will automatically lose if you fail to respond in time.

How Your Payment Provider Can Help

While avoiding chargebacks entirely is highly unlikely, these strategies can reduce their frequency or give you the support you need to win cases with the bank.

The good news is that you don’t have to deal with chargebacks on your own. Instead, a payment processor can be a valuable partner that supplies the tools and resources you need to reduce and avoid chargebacks.

Ascent Payment Solutions has experience in the hospitality and travel industry with the fraud prevention tools required to minimize or prevent chargebacks. Plus, we offer support for mitigating those pesky chargebacks and help you to comply with data and security regulations. Want to learn how we can help you prevent chargebacks? Reach out to us today!