Chargebacks are something every business needs to be prepared for. They are expensive, subject to fraud, time consuming, and extremely frustrating for all businesses. However, it is important to distinguish chargebacks from refunds. Refunds are initiated when a customer returns a product. Chargebacks, on the other hand, are initiated by the credit card issuer in response to a customer who has challenged the charge on their statement or filed a complaint of some kind.
With chargebacks, the burden of responsibility lies with the merchant. Credit card companies want to ensure their customers remain happy at all times and due to this the customer is almost always given the benefit of the doubt in relation to chargebacks. In these cases not only do you lose a sale, but you could also lose merchandise, be subject to large chargeback fees, and waste a lot of time trying to prove your case.
Chargebacks are also commonly referred to as ‘friendly fraud’ and cost merchants billions of dollars every year in the United States alone. Learning how to avoid chargebacks is essential to all businesses, but in particular for small to medium sized businesses who cannot afford to pay chargeback fees and lose merchandise. Here are ten ways your business can avoid chargebacks:
A credit card descriptor is the name that shows up on your customer’s credit card bills or statements online. One of the most common reasons a customer will initiate a chargeback is because they simply don’t recognize the charge on their statement. If you are selling a product or service online, ensure the name of the website appears on the credit card descriptor along with a contact number for your company. The same goes for a company that is trading under a branded name that is different to their legal name. Always place the company’s most recognizable name in the credit card descriptor to help customers instantly recognize where the charge has come from.
While some people will instantly dispute a charge they don’t recognize, others will take the time to research the charge first. Ensure it is easy for customers to get a hold of you and send feedback. You can do this by placing contact details in the credit card descriptor, or an email address and/or phone number on your website. It is also important to be available to respond to emails or to answer the phones when a customer tries to contact you. If a customer cannot contact your company or it takes too long to respond to an email they will simply give up and initiate a chargeback.
Selling goods online can be a difficult process as customers may think they are receiving a particular item whereas the item isn’t what they thought when it arrives. It is essential to provide as much information as possible when selling online. Write detailed descriptions of your products and provide plenty of pictures. Make sure the customer knows exactly what the product is before they decide to make a purchase. If you are offering a service, make it clear exactly what that service is and what a customer will receive for their money.
For any order that is placed online, a confirmation email is a must. Sending a confirmation email has many benefits such as being a copy and proof of the purchase that has been made. If the email bounces or the customer doesn’t provide an email address for a confirmation email, this could be considered as a red flag. Confirmation emails also reinforce your company’s brand and if there are contact details provided in the email it can help to prevent chargebacks.
The whole process of a customer purchasing goods or a service from your company should be completed as quickly as possible. Once a sale has been made, send the confirmation email immediately, ship the goods on time, perform authorization and process credit card transactions straight away, and respond to any disputes as quickly as you can. If a credit card is expired or there is a mismatch with the address, do not complete the sale. Ensure all information required from the customer is completed. All these processes will dramatically decrease the likelihood of chargebacks being files.
It is essential to ensure all information on your website is clear and easy to understand. If you have a returns, exchange, or cancellation policy, display it prominently on your website. You can also attach the policies to the confirmation email and on receipts. Similarly, if you are offering a free trial for a service, ensure your customers know if the free trail rolls into a paid contract or of they have the option to opt-in once the free trial expires. These steps can help eliminate chargebacks and help you win any disputes.
This is probably the best way to avoid chargebacks. If you offer customers a refund, it is much less likely they will feel the need to file a chargeback. If a customer is unhappy with a product or service, they will get their money back one way or another. It is much better to create a refund policy and avoid the hassle and fees associated with chargebacks than to offer a no refund policy and have numerous customers complain to their credit card companies.
A trick often used by customers committing ‘friendly fraud’ is to claim the goods never arrived. This is easily avoidable by using signature-required delivery services rather than standard post. With standard post you have no way of proving that a customer received the goods. However, by requiring a signature and even tracking on your shipped items you are covering yourself from any false claims.
Chargebacks aren’t something you should just accept as part of the businesses expenses. Don’t be afraid to challenge chargebacks by providing as much detail as possible to your merchant bank with documentation from all stages of the transaction. This will be considered when the chargeback is being resolved.
One of the best ways to deal with chargebacks is to have a company work on your behalf to resolve or stop claims. By implementing a chargeback mitigation service, such as the one provided by EthosPay, you can save time and money. Our chargeback service provides you with the opportunity to respond to chargebacks before they have been initiated fully and also fights against chargebacks on your behalf. Find our more by contacting EthosPay today.