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Minimizing Member Credit Card Disputes


A merchant chargeback, also known as a collaboration dispute, occurs when a member contacts their card-issuing bank to make a claim against a charge that appears on their statement.

In health clubs and fitness centers, these most often happen with the recurring monthly dues billing transactions. Per their membership agreement, the cardholder has authorized the charge for delivery of goods, services, or in this case, their membership subscription. Because these transactions are processed automatically, without direct participation of the cardholder, they are particularly liable to potential disputes. Below are recommendations for policies and procedures to minimize these.

First, for the initial transaction and member set up, physically swipe the card information into the club management software (CMS) program versus manually hand keying it in. This ensures accuracy and validates the information tied into the magnetic stripe. Use paperless electronic contracts with the member name indicated accurately. These are quickly retrievable when needed.

Second, the sales receipt or membership contract should include the following information:

  • The phrase “recurring transaction.”
  • The frequency of the charges.
  • The period of time the cardholder has agreed to for the charges.
  • The consent to bill the method of payment indicated.

For online enrollments, VISA allows merchants to accept an electronic record, such as an email message, as cardholder permission to set up a recurring transaction. This record should be kept and provided to the card issuer upon request. It is also recommended to have verbiage in the contract stating the cardholder signed up online and agreed to the stated terms and conditions. A unique online membership agreement could be utilized, stating “online” in the header and using an electronic acknowledgement versus a signature line.

Other best practices to reduce risk include:

  • Display and post the return and cancellation policy. 
  • Make sure to use the “customer facing name,” A.K.A the Doing Business As (dba) name for easy recognition on member statements, including phone number.
  • Have an auto renew policy that is clearly spelled out within the membership agreement, not tucked away in another paragraph. Disclose that dues are an advance payment for services that are billed immediately.
  • Participate with your CMS provider in a CC Account Updater program to verify on-file card information is correct and the most up-to-date.
  • Make sure the CMS has proper controls in place to protect stored cardholder information.
  • Use AVS — Address Verification Service.
  • Notify the customer before billing. If possible, routinely notify cardholders of recurring transactions charged to their account. The advance notification should include the amount to be charged and alert the cardholder if the amount exceeds a pre-authorized range.
  • Do not store CVV2* data. This is strictly prohibited.
  • Check daily for cancellation or non-renewal of services paid for with a recurring transaction. Comply with all such requests in a timely manner and notify the cardholder the recurring transaction has been closed.
  • Process all credits promptly. If a cancellation request is received too late to prevent the next charge from being posted, submit the credit and notify the cardholder.

Chargeback notices are sent via U.S. mail, and only for chargebacks billed under that merchant account. As there can be delays and response time is limited — typically 10 days — merchants should monitor their account online two to three times a week. Seeing an unexpected withdrawal is an indication of a possible dispute. The bank will hold funds during the waiting period.

The letter will just show parts of the account number ­­— i.e. first five or last four — and clubs need to be able to determine who it is for. Make sure your CMS has provided a secure way to research and determine this.

Respond ASAP with all documentation available — agreement showing terms to cancel, cancel letter if received and usage report. A record of purchases, class participation, or training sessions helps validate awareness of the business policies and shows services have been provided.


Carole Oat is the national sales manager for Twin Oaks Software. She is a former large gym owner and operator for 15 years serving approximately 3,000 members and having managed 65-plus employees in a 53,000-square-foot, multi-sport facility. Now with Twin Oaks Software, she oversees the sales and client relations staff. Twin Oaks, established in 1991, is a club management software, billing and returns management provider located in Berlin, Connecticut. For more information, email coat@tosd.com or call 860.829.6000 x 281.

Carole Oat

Carole Oat is a national sales manager at Twin Oaks Software and a former club owner and operator for 15 years. She can be reached at coat@tosd.com or 860.829.6000 x 281.

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