Owning and operating a successful business has its typical challenges under normal circumstances, which can oftentimes lead to frustration and anxiety. While most successful owners take safeguards to protect their businesses, chargebacks —or credit card disputes—can not only damage but in some cases destroy a business.
When a customer receives their statement or reviews their account transactions online, they might question a charge and contact the credit card company. After a dispute has been submitted, the business will, in turn, be notified that a chargeback has been filed and that there is a review in progress.
At its core, a chargeback is defined as a charge that is ultimately returned to a customer if they successfully dispute an item on their account. Although they can be nominal at times and not cause major issues, large chargebacks can cause business owners unnecessary fees and customer attrition, not to mention a pounding headache.
In this blog, we’ll review the types of chargebacks and five tips for reducing them.
The main 4 types of chargebacks are:
- Criminal fraud: When a credit card is stolen and used in a purchase
- Merchant error: When the merchant accidentally charges for the incorrect amount or duplicate charge
- Service error: When a merchant experiences a chargeback because of misrepresentation of products or services
- Friendly fraud: When a customer changes their mind about a purchase or does not recognize the purchase on their statement
5 Tips for Reducing Chargebacks
- Use Security/Fraud Filters
- AVS (Address Verification System) requires cardholders to list your billing address with credit card information when running a card not present transaction.
- CVC (Card Verification Code) requires cardholders to enter a three digit security code found on the back of the credit card when entering a transaction.
- Use Clear Business Descriptors
- One of the biggest reasons merchants incur chargebacks is because the customer does not recognize the charge on their statement. Use/list your company name on as your credit card descriptor to ensure customers will recognize the transaction. Merchants should notify customers about how the charge will appear on their statement.
- Deploy Risk Rules and Consult with your Processor
- Partner with a payment processing company that utilizes technology like an online portal that provides tools to help you dispute chargebacks. Find a payment processor that will work with you to develop a customized fraud prevention strategy.
- Delivery Tracking and Confirmation
- For merchants and drop shippers that deliver physical goods, use shipping tracker numbers and signatures to validate customer receipt. This is especially critical for high value merchandise.
- Be Easy to Work with
- Provide detailed online product and service descriptions to prevent returns from customers that didn’t get what they expect
- Provide readily available contact information on your website so customers can email or call your business to inquire about a charge on their credit card statement. Often the key to resolving a potential dispute is just good communication.
- Offer refunds. If someone is not happy with your product or service, offer them the opportunity to get their money back.
Regardless of why they occur, chargebacks always bring about negative and sometimes devastating effects. Fortunately, for businesses owners, there are an array of tools and resources that they can use to overcome these headaches.
If your business is experiencing chargebacks that are resulting in unnecessary fees and causing you stress and anxiety, use our automated and online tools to fight them.
Start preventing chargebacks today.