Preventing Chargebacks 101
Nothing makes a merchant’s heart skip a beat like the word, “chargeback.” If not handled properly, it can be like money being taken right out of your pocket. However, chargebacks are a common factor for any business that accepts credit cards.
The chargeback system was created by creditors for the protection of consumers from fraudulent charges. Thus, keeping merchants accountable for their actions.
However, as the merchant, receiving a chargeback can feel more like an attack. But, not to worry. There are ways around this.
What Is A Chargeback?
Simply put, a chargeback is a reversal of funds that have been transferred. This is different than a return, which is where the consumer speaks to a merchant directly and requests a refund. A chargeback is between the consumer, their issuing bank and the merchant’s bank – leaving the merchant out of the loop completely.
Since chargebacks are enacted in order to protect the consumer, the merchant is guilty until proven innocent.
In the case of too many chargebacks, whether successfully mitigated or not, this can cause damage to the merchant’s reputation and may result in a suspended merchant account or a terminated merchant account. If there are a multitude of chargebacks that have not been addressed, there could potentially be an investigation or criminal charges.
Chargebacks also come with fees and penalties on top of the reversed funds, which are debited directly from the merchant’s account.
The best thing to do in this case is to avoid chargebacks at all costs.
Most Popular Reasons For Chargebacks
There are plenty of reasons why chargebacks happen, but the most popular is fraud. This happens when a consumer’s card and information have been stolen and purchases were made without the cardholder’s consent.
More often than not, it’s a matter of perception. Sometimes the consumer doesn’t care for the product or services provided and would like a refund without going through the hassle of contacting the merchant.
More minor reasons include technical errors, for example having an expired authorization. Duplicate billing, bank errors, incorrect dollar amounts and refunds that were never issued also seem to be among the reasons for chargebacks.
Here are a few helpful tips for preventing chargebacks:
Communicate: If there is an open line of communication between the consumer and the merchant, most issues can often be avoided or resolved. Also, provide consumers with your contact information so they can contact you directly to have the issue corrected without having to initiate a chargeback.
Clearly Describe Your Business: Make sure that your products and policies are clearly defined so that in the case of a dissatisfied purchase, the liability falls on the consumer instead of you as the merchant.
Make Refunds Easy: If you find that a consumer is truly unhappy with their product or services, have an easy return/refund policy so the consumer doesn’t feel the need to file a chargeback.
Be Sure Of the Expiration Date: Don’t ever accept an expired card.
Get A PIN Or Signature: Always make sure to get a PIN or signature, which provides proof that the consumer was present at the time of purchase. Never accept an unsigned credit or debit card.
Keep Tidy Records: Make sure that your sales receipts have been saved and that they can easily be read. Chargebacks can occur from within the first 180 days to 3 years following the transaction. Thus, you will need to keep all of your records in an orderly fashion to be able to provide information upon request.
Follow Credit Card Processing Protocol: There are guidelines posted by your merchant processing company that can help you avoid incident. For example, if a card is denied, do not reswipe or force the transaction. Multiple swipes, manual keying of data or call for credit approval can all result in a chargeback.
Respond Quickly: Being prompt with your response to a chargeback may save you losses. Because there are time limits on each step of the cycle a delayed response could result in an outright loss.
Chargebacks can harm a merchant’s business if they are not taken seriously. If you would like more information about preventing chargebacks, you have come to the right place. We offer an in house chargeback prevention service, CB Dispute, which will explain the process, respond and fight on your business’ behalf and monitor for additional chargebacks on a daily basis.