Reduce Chargebacks in Restaurants

Chargebacks are a real concern for business owners. Not only do they cost money, they cost merchants their valuable time and energy, as well. An excessive chargeback history can also result in the suspension of a merchant account. Restaurants can greatly reduce the amount of chargeback disputes by following a few important guidelines. The key is to be proactive, and think like a customer.

No Tip Pre-authorization

Resist the urge to add a tip pre-authorization to restaurant bills. The payment card should be processed for the exact amount of the bill with a 0% tip authorization. For example, if the bill is $57.00, the payment card should be processed for $57.00. Trouble can occur when an assumed 20% tip is added to the transaction, and the customer decides to leave a cash tip, less tip, or no tip. The customer may see this pending transaction as an overpayment attempt, and contact their bank. A chargeback dispute could be generated, resulting in an unhappy customer that may never return.

Processing a higher bill amount can reduce a cardholder’s available funds on their debit or credit card. This can be especially sensitive when a patron is using a debit card directly linked to their bank account. The higher authorization against their account could result in adverse effects against the customer, such as a denial on a future transaction.

Card Tracking

Restaurants and bars can get very busy with many different customers using their credit cards at the same time. A mix up of payment cards can occur if restaurant employees are not adequately trained on the proper handling of credit cards.
Payment card mix up can also occur in the bar setting, where customers hand over a credit (or debit) card for a tab. Staff must take precautions to ensure that the right card is returned to the right customer. Cards should be returned to their owners promptly after processing.
One way to ensure the present credit card matches the credit card transaction is to compare, and match the account number on the point-of-sale device.

Post Polices

If your establishment charges a fee for cancelled or no show reservations, these policies must be clearly posted where patrons can see. Reservations taken over the phone should have these policies verbally communicated to them. Chargebacks are commonly initiated when establishments charge a reservation cancellation fee without the patron’s knowledge.

By following proactive measures like no tip pre-authorizations, proper card tracking, and posting policies restaurants can greatly reduce the amount of chargeback disputes they receive.