Rule #1 of running your restaurant is to keep expenses as low as possible while eliminating unnecessary costs. And yet, one of the essential investments any restaurant needs to make is the ability to accept credit cards and a variety of other payment options.

But with so many moving parts to any credit transaction, it’s more difficult than ever for merchants not to get tagged with chargebacks. What exactly is a chargeback though, and more importantly, what can be done to avoid them, protecting restaurants and customers alike?

What’s a chargeback, anyway?

In short, chargebacks are disputed transactions. A customer may claim that they did not eat at your restaurant and should not have to pay for their meal, therefore the credit card issuer charges you back for that payment. Chargebacks were originally designed to act as a failsafe for consumers, ensuring that they could get a refund for a problematic purchase. And while that’s a wonderful option for consumers, card issuers still need to hold someone accountable for the lost revenue from that transaction. In the default situation, guess who that is? That’s right, it’s the merchant. Remember Rule #1 above? Subjecting a restaurant to potential chargebacks definitely qualifies as an unnecessary cost.

How can restaurants protect themselves?

First, be aware. This may seem obvious, but it’s amazing how many merchants don’t take a close look at their transactions. Knowing that consumer fraud is the number one reason for chargebacks and being on the lookout for telltale signs of anything out of the ordinary—unverified user details and different shipping and billing addresses—can go a long way in protecting your transactions.

Second, ensure you are EMV-chip card enabled. As of October 2015, all businesses that accept electronic payments were required to have “EMV compliant” point of sale (POS) systems. These EMV compliant systems are capable of reading the extra security layers transmitted by EMV chip-enabled cards. When restaurants don’t have an EMV compliant point of sale system, they are automatically liable for any fraudulent transactions if they accept payment from an EMV chip card.

To be clear, if a POS device doesn’t have the ability to read EMV chip cards, the restaurant is vulnerable to future attacks, and all future chargebacks. With that in mind, it’s essential to upgrade your POS system to become EMV compliant. Not only is it an industry mandate, it’s a smart investment. Any money you spend upgrading systems will be a fraction of the cost incurred in potential chargeback fees, which can run thousands of dollars a month.

The California Restaurant Association can help

The CRA has partnered with First Data to bring you Clover, an all-in-one business management solution that helps you get paid, sell more and run your restaurant better. Clover lets you accept virtually every payment option–including MasterCard^®, Visa^®, American Express^®, Discover^®, PIN-based and signature debit cards, gift cards, EMV^®-enabled chip cards, PayPal, Apple^® Pay, Samsung Pay, Google Pay, and electronic and paper checks. You can allow your customers to pay in a variety of ways while ensuring that your budget is safe from unexpected chargebacks. In today’s market, that’s a big protection for your bottom line.

To learn more about how First Data and Clover Solutions can help, please contact a First Data Business Consultant at 888.853.8499 or visit www.firstdatapartners.com/cra.