chargeback fraud

5 Ways to Reduce Chargeback Fraud in Your Hotel

Chargeback fraud occurs when customers dispute a charge on their credit card statement. That can often result from fraudulent activity, such as the ever more common “friendly fraud” in the hospitality industry.

Merchants from all industries lose 4.4% if their annual revenue due to chargeback fees, and chargebacks can often be very difficult to win.

You shouldn’t have to deal with chargeback fraud. To help you understand chargebacks and how to reduce them, we’ll discuss:

  • What chargeback fraud is, and how it works
  • Why chargeback fraud happens in the first place
  • Things you can do to reduce chargeback fraud

Without further ado, let’s take it from the top…

What is Chargeback Fraud?

Chargebacks are a part of the payment processing ecosystem. When a chargeback occurs, the cardholder contacts their issuing bank to dispute a charge on their credit card statement.

The issuing bank then opens an investigation. If they find the charge fraudulent, they will reverse it and issue a refund to the cardholder. The merchant will then be charged a chargeback fee.

There are many reasons why chargebacks can happen. Still, chargebacks fraud is usually the result of fraudulent activity, such as when a customer claims they never received the product or service they paid for.

In 2016, nearly 50% of all revenue lost from online merchants came from chargebacks. And chargebacks are on the rise.

Common Types of Hotel Chargebacks

Chargeback fraud mainly happens to businesses that use card payments. The hotel industry, in particular, is particularly vulnerable to chargeback fraud.

Before a guest can file a chargeback, they must give a valid reason to their card provider. These reasons are called chargeback codes, and there are many of them. 

The most common hotel chargebacks are:

  • Credit not processed: The guest has asked for a refund but never received it. That can mean that the refund request was overlooked or didn’t abide by your policy.
  • Services not rendered: If you receive this claim, the guest states your hotel charged their card even though they did not stay at it.
  • Not as described: The guest had a problem with their stay and believed it did not match the description on your site.

Besides those three, you also need to know about “friendly fraud. ” It’s a term used to describe a situation in which a cardholder commits fraud, asking for a chargeback after authorizing a charge.

Friendly fraud chargebacks are the most common type of chargebacks for hotels and can be very costly. They’re pretty hard to dispute too. Often, the guest will say that they were “confused” by something, like your cancelation policy. Nearly half of friendly fraud cases are caused by “misunderstandings”.

5 Things You Can do to Reduce Chargeback Fraud

You can do a few things to reduce chargeback fraud in your hotel. By implementing these best practices, you can minimize the chargebacks you receive and the fees you pay.

1. Collect Cardholder Data

The first thing you need to do is make sure you’re collecting the proper cardholder data. When a customer books a room, you should collect their name, billing address, and email address.

Regarding front desk reservations, you must train your staff members for customer information. Remind them to verify that the information is correct and up-to-date.

Of course, the easiest way to collect this data is through online booking. ChargeAutomation can help you do that. Our platform allows you to easily collect and store your customer’s data during the booking process.

2. Have Clear Policies On Your Site

Your policies play a significant role in chargebacks if guests books a room on your site. Regarding chargebacks, most customers will say they didn’t know about your policies or were “confused.”

That’s why having clear and concise policies on your site is essential. Your chargeback policy should be easy to find, and it should be straightforward.

Here are some chargeback policies and best practices:

  • Use simple language that everyone can understand
  • Be clear about what actions will and will not result in a chargeback
  • Include your refund policy

3. Issue Refunds

Once you receive a chargeback, you can’t issue a refund to that customer. That’s why it’s essential to issue refunds as soon as you can verify that the charge is valid.

Of course, you don’t want to issue a refund to every customer who asks for one. That’s why it’s essential to have a clear refund policy in place. Your refund policy should be easy to find and understand.

4. Keep Documentation: 

Many people will tell you to save documentation for numerous reasons: taxes, legal disputes, and more. When it comes to chargebacks, you must have every correspondence, receipt, and supporting document saved.

If the chargeback is related to a specific charge, ensure you have the documentation to support that charge. That can be something small as an email exchange or something large as a contract.

5. Have a Good Payment Processor

Many payment processors offer little or no support when a retrieval inquiry happens. As a result, you’re on your own regarding chargebacks.

That’s why it’s essential to have a good payment processor. A great payment processor will help you minimize chargebacks and provide you with the support you need if one occurs.

Using our charge protection software in tandem with your payment solution is a great way to automate your workflows and reduce chargebacks. Our platform makes it easy to collect and store customer data, issue refunds, and keep documentation.

Safe Payment with ChargeAutomation

Your hotel can’t afford to lose money to chargebacks fraud. Following these best practices can reduce chargebacks and keep your hotel running smoothly.

ChargeAutomation can help you automate your workflows and reduce chargebacks. Our platform makes it easy to collect and store customer data, issue refunds, and keep documentation. Make sure to contact us and sign up for free today!



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