Credit card fraud is a serious economic problem that costs merchants $190 billion a year, according to a 2010 LexusNexis study. If someone makes a purchase at your business using someone else's credit card, the cardholder can dispute the transaction and the charge will typically be reversed -- a process known as a chargeback. But chargebacks can leave you empty-handed, and there are several steps you can take to reduce their cost to your business.
If a cardholder notices an unfamiliar purchase on their credit card account, they can report the purchase to the credit card company and initiate a chargeback. If the credit card company finds that the card was stolen, they may cover the purchase and refund the cardholder's money, while still paying you. However, this depends upon the
cardholder agreement and your agreement with the merchant. In other cases, the card company might initiate a chargeback. You'll have an opportunity to dispute the chargeback, but if the card company finds that the card was fraudulently used, you'll lose the money you made on the transaction.
Some customers use chargebacks to get products for free or to get a refund on a purchase they regret. If you suspect that the card wasn't actually stolen, you may be able to fight the chargeback by providing a signed credit card slip, video footage of the customer using their card or evidence that you regularly do business with the consumer. However, if you're mistaken and the card was actually stolen, this can alienate a potential customer, so try to address the issue with the customer first.