Do I need customer signatures?
Updated: Jan 16, 2019
Recently, a customer of ours heard a rumor that the need for a signatures on receipts had gone away. Is this true? Maybe you noticed a few years back that some stores stopped requiring signatures for small purchases. What exactly are the rules? And what are you supposed to do with all those receipts anyway?
The signature on the receipt dates back decades, and the original intent was to fight fraud. In order to prevent someone from fraudulent using another person's credit card, the signature had to match that of the cardholder which was on the back of the card. It was a merchant's responsibility to check if the signatures matched. Also, if a transaction was disputed, the signature on the receipt served as proof that the customer authorized the transaction.
Today, retail (in-person) fraud has seen a sharp decline in the US due to the rollout of EMV Chip technology, as well as the widespread adoption of mobile wallets and digital authentication methods like fingerprint and facial recognition. So, the result is: it is no longer necessary to capture a signature to prevent fraud.
Most of the card brands had already eliminated the need for signatures on transactions under $25 or $50 (varies by brand) so you may have noticed that fast food restaurants or other similar businesses were already not requiring a signature. In April of 2018, Mastercard, AMEX and Discover stopped requiring signatures on customer receipts in the US and Canada for in-store credit and debit purchases. Visa made signatures "optional" for EMV enabled merchants in April as well. This means faster check outs and less receipts to track for many businesses.
There are some additional factors that you must consider before deciding on eliminating signatures at your place of business. Although you are not required to obtain signatures, having that signed receipt could help you fight a chargeback if a customer decides to dispute the charge. We recommend requiring signatures if you experience periodic chargebacks and you want additional evidence to assist you in a dispute. This is especially important if your average credit card transaction size is larger than $50. The more evidence you have that a transaction is valid, the better equipped you are to win your chargeback. It is also important to get signatures if you are running a business that accepts tips. You want evidence that the customer authorized the adjustment to the original sale amount. Of course, the best way to avoid a chargeback is not to have one. Having a customer friendly refund policy will help you avoid costly chargebacks and keep your merchant account in good standing.
If you are going to continue to require a signature on your receipts, you may be wondering how long you have to hold on to them. The time frames that customers have for filing a chargeback vary by the card brand used and the reason for the chargeback. Typically cardholders have between 60-120 days to file a dispute on a charge. As a business owner, if you are saving receipts, you want to save them at least 120 days to protect against most chargebacks. The good news is that many cloud based Point-of-Sale systems now offer electronic signature capture can make it easy to store and later retrieve the signature when needed.
If your business is struggling with chargebacks, please give us a call. We have a fraud mitigation tools and chargeback protection warranties to help. If a business' chargeback ratio is over 1% you are at risk of losing the ability to accept credit cards, so you should be working closely with your processor to mitigate fraud and reduce your chargebacks.