For businesses that accept credit cards, chargebacks are a necessary risk. However, there are strategies that can help protect you from chargebacks.
The Fair Credit Billing Act of 1974 was passed into law to shield cardholders from unfair billing practices and unscrupulous merchants. As an unintended consequence, it has made it easier for customers to reverse purchases made with a credit card and demand a refund.
Chargebacks can occur for many reasons. They include contested transactions regarding the quality of merchandise or services, an incorrect amount charged to a credit card, a stolen card used without the knowledge of the cardholder, an invalid account number being entered, as well as dishonest consumers who attempt to misuse chargebacks.
Regardless of the reason, chargebacks and the added fees they incur can wreak havoc on the cash flow of a business. Here are nine tips to help you protect yourself from chargebacks.
1. A clearly defined company name in your descriptor reduces the risk of chargebacks.
The Payment Descriptor is how your business contact information appears on a customers credit card statements. Merchants that employ a different name in their descriptor, such as a parent company or an affiliate, are more likely to experience chargebacks because consumers don’t associate the name with the merchandise they purchased.
2. Be aware of the credit card information that you’re required to verify and make it part of your daily routine.
A few simple precautions can make a significant dent in the number of chargebacks you receive. That means that you need to adhere to processor protocol. Credit card processors have unique rules when it comes to accepting credit cards.
For example, when it comes to card-present purchases, always use a mobile card reader, and ask for additional ID. For online and over the phone vendors who rely on card-not-present transactions it is vital to use a secure e-commerce platform that enables address verification to ensure that a consumer’s billing address matches the address listed with the credit card issuer. It is also prudent to ask consumers to provide the security code of their credit card.
3. Use a payment processor with both fraud detection and seller protection features.
The best fraud prevention features include address verification and card identification data verification. If your current merchant processor doesn’t offer these services, you might want to speak with a payment professional at Sekure Merchant Solutions.
4. Stay on top of customer service issues.
Credit card processors generally provide chargeback notifications that enable a merchant to know if a customer is disputing a payment. Such warnings can help you nip disputes in the bud by contacting the customer directly and addressing his or her concerns.
5. Post a clear return policy in your store, websites and the receipts you issue.
Chargebacks involving returns can be readily resolved if your return policy is clearly articulated. However, if your return policy is not clear the credit card issuer might side with the consumer.
6. Consider employing an in-store point-of-sale system.
Such systems are affordable and can include operational features that track sales and shipping. When a chargeback occurs, the software makes it simple to retrieve records of transactions, buyer information, payment details, and proof of delivery quickly and seamlessly.
7. Limit chargebacks by providing superior customer service.
If a customer expresses dissatisfaction, try to solve the issue before the consumer resorts to a chargeback.
8. Get it in writing.
If you’re providing a service, protect yourself with a contract that states exactly what your service includes. Getting the customer's signed authorization on the service contract can reduce the potential for chargebacks.
9. Not every chargeback is worth contesting.
When faced with a dispute, it is often more prudent to refund the customer and not challenge the claim. If the amount is nominal, or if it appears unlikely that you will win the charge back battle due to circumstances like a lost package or a service fee error, it’s sometimes best to just refund it and move on. Plus, if you have a history of losing charge back disputes, it could undermine your standing with your merchant processing provider.
Chargebacks aren’t only costly, they are also inconvenient and time-consuming. To remain one step ahead of credit card chargebacks, follow these nine tips, and you'll not only save money, but you will also free yourself from a busload of unnecessary frustration!