How to Avoid Chargebacks

 

How Does a Chargeback Happen?

The most common reason for a chargeback is a customer being dissatisfied with a product or service. A consumer can contact the bank that issued their credit card and request that the funds for disputed charges are returned. This type of chargeback is easy to avoid by providing exactly what you advertise to your customers. There are a number of other situations which would warrant a chargeback. Some of them are:

  • Failure by the merchant to get an authorization
  • Expired credit card used for transaction
  • The receipt was not signed
  • The goods paid for were never received
  • The customer's PIN was not obtained
  • The merchant failed to obtain an imprint of the credit card
  • Fraudulent charges

The Chargeback Process

Chargebacks can be costly to merchants and in some cases consumers abuse this privilege. In most cases an investigation is carried out to determine the validity of the claim. A detailed account of the situation may be requested by the credit card issuing bank while they investigate the chargeback, and if the request is found to be valid then the issuing bank sends the transaction back to the acquiring bank which hosts the merchant account. The acquiring bank will also research the validity of the claim, and if the claim is valid, then the chargeback is deducted from the merchant's account and the merchant is made aware of the chargeback transaction. If the claim is not valid, then the request for a chargeback is denied and the customer remains responsible for the purchase.

This reversal of funds has a negative impact on a merchant because each individual chargeback carries a fee with it. This fee can range anywhere from $25-100 per occurrence. Moreover, such a merchant is deemed high risk and repeated offences may result in the acquirer no longer processing credit cards for a merchant who repeatedly has chargebacks.

10 Steps for Preventing Chargebacks

  1. Provide clear information regarding your refund policy.
  2. Provide detailed shipping information including cost and how long it will take for delivery.
  3. Have an order summary page with a conspicuous area highlighting your company name and contact information.
  4. Do not use numerical business IDs as these could confuse your customers and make them question the transaction. Make the "Doing Business As" (DBA) name clear and visible.
  5. Providing easy tracking for all shipments to increase customer confidence.
  6. Do not accept payments from third parties. Only accept credit cards belonging to the purchaser and shipping to their address.
  7. Request the CVV2 security codes to ensure the purchaser actually has the credit card with them and is not using a fraudulently obtained counterfeit card.
  8. If possible, delay charging the credit card until the order has shipped.
  9. Be available via phone or email should your customer need to speak with you about their purchase.
  10. Keep good records of all transactions in the event you need to fight a chargeback.

Need More Information? Contact Us »

Got a minute?
Get a FREE Rate Quote!

Fill out our no obligation rate request form and we will contact you ASAP!

Call us at 1 (877) 807-9128

 

 

Free Rate Quote

 

Code of Conduct Resolution