Credit card chargebacks, or the amount credit card providers expect retailers to pay for fraudulent or disputed transactions, are an unfortunate reality for all business owners. Chargebacks occur when cardholders contact credit companies to dispute charges, leaving eCommerce companies to pay the amount owed.
With credit card chargebacks growing at a rate of 20% a year, it is crucial that business owners understand chargebacks and create a plan to monitor and avoid them. If left unmanaged, chargebacks can create a big loss to a business’s bottom line. It is important for business owners to proactively manage and avoid them in the first place.
Let’s first discuss how to handle chargebacks when they do happen, so you can then be better prepared to avoid them in the future.
A chargeback has been filed. What do I do now?
Most business owners have the same first instinct: dispute the charge. Although it may seem like your eCommerce business is not at fault, very few merchants who dispute a chargeback actually reach success.
Disputing chargebacks may feel like the right thing to do, but the proof is in the numbers – knowing how to avoid chargebacks in the first place is the true long-term solution. The goal is to fight chargebacks at the root cause, helping reduce the number of chargebacks you get from online shoppers, to begin with.
Find the Right Merchant Account Provider
The first step in avoiding chargebacks is partnering with a good processor and merchant account provider. Building a great relationship with the processor of your choice will ensure you have someone to call in the event of an issue.
Do not always view the cheapest option as the best option. Consider the quote, “what you pay for is what you get.” A merchant account provider with great customer service and transparency will greatly improve a company’s chargeback experience.
Monitor All Transactions
Checking each transaction should be part of your eCommerce day-to-day activities.
Monitoring every transaction will help your business find fraud before it finds you. To help identify fraudulent transactions, ask customers to provide additional payment details. Capturing information like a card’s CVV number, a billing address, and a zip code will help you track possible fraudulent transactions with missing or inaccurate information.
Improve Your Customer Service
Also, consider your rate of complaints and customer service scores. If your business makes it hard for customers to ask questions or give feedback, they will quickly turn to dispute the entire charge.
Not only will your rate of chargebacks increase, but your likelihood of successfully disputing chargebacks will decrease. When a business disputes a chargeback, processors will take a look at the business’s customer service rating. If it is poor, they will quickly assume the company provided poor products or services.
Make sure customers do not find it easier to file a chargeback than simply contacting your company. Your company’s phone, email, social media, or even live chat should be readily available at their fingertips. Since customers have different preferences when communicating, the more options the better.
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What They See Is What They Get
Especially with eCommerce sales, it is crucial that your business be transparent and honest in all advertising. Customers are purchasing your product or service based on what they see and read on a computer screen. Making the purchase is an act of trust between your customers and your business, so make sure they do not feel scammed when they receive the item.
Keep in mind this does not mean advertising a chair but selling a table. Think of this as providing honest quality – if you advertise that the item is durable, make sure it is durable. If you advertise that the item is thick, make sure it is manufactured to be thick.
When customers feel an order fits the description of what they saw or read online, the likelihood of receiving a chargeback reduces. Plus, dishonest advertising is just bad business! Keep it ethical.
Stay on a Schedule
Customers will quickly file a dispute if their item(s) do not arrive on time.
Make sure your company can meet the shipping expectations it sets with customers. Most customers will understand if products and services take more time upfront, but they are not so understanding when items become late.
We are only human, so accidents will happen. The weather may get bad or an employee will call in sick causing work to fall behind. Regardless of the reason, communication is key if an item will not arrive on time. Communicate with customers in multiple ways – like email and text – to explain the issue and reset expectations.
Do not promise a delivery date you cannot keep. The last thing any customer wants is to feel like your business took their money and ran!
In many ways, chargebacks can feel like just another risk of doing business. True fraud happens, but your business does not have to suffer at the hands of frequent chargeback expenses. Tackle chargebacks at their root cause first, and then have a plan for appropriately dealing with them when they do happen. Use this guide as a resource to get started putting preventative measures in place today.