Steps For Mitigating Fraud-Related Chargebacks

March 1, 2017

Fraud-related chargebacks are an unwelcome part of doing business. When a cardholder suspects their information to have been compromised as a result of fraud, they will ask for the transaction to be reversed, creating a chargeback for the merchant. Fraud-related chargebacks can result in a significant amount of lost sales each year when factoring in the lost dollar amount of the transaction, the related merchandise and any costs associated with responding to the chargeback.


One of the easiest and most effective ways of dealing with fraud-related chargebacks is through proper card acceptance and processing procedures. Employing the right processing procedures can help to: a) ensure that a legitimate card is being used, and, b) verify your customer’s identity.

Proper card acceptance and processing procedures

1. Examine the physical properties of the card

  • Train staff to look for the hologram, printed bank identification number, unique embossed symbol and signature panel at the back of the card to verify that the card is real.
  • Check the card expiry date.

2. Employ the proper acceptance procedures by transaction type. Some of the proper acceptance procedures include the following (please read our merchant operating manual for more details):  

Chip & PIN transactions

  • Ensure that the card remains inserted in the Chip & PIN terminal throughout the entire transaction.
  • Once the terminal displays the purchase amount, the cardholder will be prompted to enter his or her PIN on the keypad.
  • If the PIN is confirmed and the purchase approved, a receipt will be printed.
  • View the receipt after the transaction to see if the cardholder’s signature is required in addition to the PIN. If so, request that the customer sign the receipt.

Swiped transactions

  • Under certain circumstances, you may be asked to perform a swiped transaction, i.e. if a card’s chip is broken or dirty, or the terminal’s reader is obstructed, etc.
  • Ensure that the card is swiped once in the direction of the arrow shown on the reader.
  • If the purchase is approved, a receipt will be printed with a signature line.
  • Compare the signature on the card with the signature on the receipt to ensure they match.
  • If you receive a message of “Call” or “Call Centre” on your POS terminal, call the Moneris Authorization Centre at 1-866-802-2637.

Contactless transactions

  • Contactless transactions under a specified amount require no signature or PIN.
  • Once the terminal displays the purchase amount, the cardholder will hold their contactless card up to the screen (closer than 4 cm) to complete the transaction.
  • A transaction response will be provided within a few seconds.
  • Unless the cardholder specifically requests it or the total transaction amount is above the prescribed limits, you do not need to provide a receipt to the cardholder.
  • However, always retain a copy of the receipt for your records in the case of a dispute.

Manually-processed transactions

We recommend that you do not key enter a transaction on your device as this can increase the risk of fraud and chargebacks.

Manual key-entered transactions are not permitted for UnionPay unless it is to process a hotel or car rental reservation pre-authorization transaction. Effective April 21, 2017, Visa, Mastercard and Discover are revising processing standards making support of manual key-entry transactions mostly optional. Merchants who choose the option to manually key-enter Mastercard or Discover transactions will no longer be protected from chargebacks even if they obtain a manual imprint of the card and the cardholder’s signature.

If a card’s chip or magnetic stripe cannot be read and you choose to manually key-enter the transaction, please follow the proper card acceptance procedures as set out in our merchant operating manual.

3. Retain a copy of all transaction receipts and manual sales drafts for your records.

  • In the case of a chargeback dispute, you will be asked by your processor to submit copies of the transaction receipt as well as additional documentation to facilitate resolution of the dispute. Keep transaction records stored somewhere convenient and safe, as they will need to be provided within the timeline communicated to you by your processor.

Oftentimes, just keeping a watchful eye on activity within your store and the transactions themselves can help to identify fraud in real-time. If you ever suspect fraud during a transaction, call 1-866-802-2637 to report a Code 10 authorization, which transfers you to the card’s issuing bank to answer a series of yes or no questions. Using a Code 10 authorization is one of the best ways to protect your business from loss in the event that you suspect that your customer is not who they say they are.

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