Payments High-Level

Avoiding chargebacks

Chargebacks are a costly. Credit card chargebacks occur when customers contact their credit card issuers to dispute charges. If an issuer believes a dispute is valid, your merchant account is debited for a credit card charge that had previously cleared. This means you lose the money and are charged a fee from the processor that may range from $15 to $100.

Customer disputes may be considered valid for many reasons:

  • Purchase was made fraudulently by a third party, using the customer’s identity
  • Didn’t receive an item they ordered
  • Feel that a product or service was substandard or not what it was represented to be
  • Were incorrectly billed
  • Don’t recognize the charge on their credit card statement

When it comes to chargebacks, an ounce of prevention is worth 10 pounds of cure! The reason is because:

  1. The burden of proof to show that a customer has been rightfully charged falls on you.
  2. Banks will process a chargeback if you don’t respond in the allotted time.
  •  Purpose of this article: Here are 5 ways to help you reduce the risk of chargebacks

1. Follow processor protocol

Every credit card processor has its own protocol when it comes to accepting credit cards. For card-present purchases, in which the card is swiped in person, be sure to check the expiration date and enter the security code on the front or back of the card.

For card-not-present some processors may want additional identity confirmation through services like Verified by Visa or MasterCard SecureCode. They require customers who opt in to enter an extra password to authorize credit or debit card payments online. They may also require you to get proof of delivery when you ship items.

You can also use Address Verification Service (AVS) anti-fraud tool. AVS compares a customer’s name, address, and zip code with the information on file at the credit card company.

And you should also capture the CVV/CVC codes to help ensure the person using the card number has the card in hand – not just the number.

2. Use a clear payment descriptor

If the customer does not recognize the charge on their bill they may dispute it. Be sure your descriptor (how the charge appears on their bill) is what your customer will recognize.

3. Deal with customer service issues promptly

Make it as easy as possible for customers to contact customer service. Make the return policy clear at the time of the transaction. Many customers will go to a business to resolve a dispute first. If they are not satisfied, then they start the chargeback process.

A direct refund to a customer is always less expensive than if a customer wins a chargeback.

4. Learn to spot warning signs of fraud and train your employees

Pay attention to any suspicious details. For example, if the credit card security code isn’t correct or if the billing and shipping addresses don’t match. In these cases, you can make inquiries to ensure that the customer is legitimate.

5. Fight back when it makes sense

Each chargeback could cost you an additional fee. Plus, if you have a history of chargebacks, it could hurt your relationship with your merchant account provider. You may not choose to devote the time and resources to fighting every chargeback, but if you think you could win a case, it may be worth pursuing.

Payments Detailed

Why do you need a payments strategy?

Payments are fast-becoming an opportunity to better serve your customers. Ensure you’re not paying too much to bring added convenience to them.

Share this Article

Was this article helpful? Go ahead and share this resource with your team.

Start building your payments strategy

At any time, we’re ready to help point you in a direction that works for your business. Enter your email address, answer the quick survey questions we send back, and we’ll get you personalized advice.

Start typing and press Enter to search