A credit card chargeback is something that occurs when customers present disputes to credit card issuers. It involves a reversal of the transaction, debiting of the merchant’s account and re-depositing the funds in the customer’s account. Chargeback happens due to a wide range of reasons including shipping damaged or faulty goods, failure to deliver goods, charging customers more than once for a purchase, and general dissatisfaction with a product or service.
Credit card chargebacks can be very costly for merchants. Besides losing the sale, you might also be required to pay a chargeback processing fee, as well as a fine from the credit card issuer. Worse still, your account may be labeled high-risk, thus negatively affecting your reputation.
Here are some tips for lowering the risk of chargebacks:
1. Have a clear payment descriptor
When customers make a purchase from you, some descriptive information appears in their credit card statement. This is what is referred to as the payment descriptor. When it comes to chargebacks, most of the disputes are related to unclear payment descriptors. If the customer’s statement shows different details from what is expected, there is likely to be a dispute. Therefore, you need to ensure that your descriptor contains information which your customer will recognize.
2. Put everything in writing
One of the best ways of protecting yourself from chargeback is to ask customers to sign an agreement which outlines the specific services you will offer. You can give customers the option of signing the document electronically or manually, and then submitting it via email or fax. The most important thing is to get their consent in writing. In case of a dispute, this contract can help you to make a successful defense.
3. Handle disputes promptly
When a customer disputes a charge, your credit card issuer will send you a notification about a possible chargeback. When you get such notifications, you need to take action as fast as possible. One of the most effective ways of doing this is by applying good customer service skills. If a customer voices their displeasure about something, contact them quickly and find a way of solving the problem. In case this does not work, you can look for other solutions.
4. Look out for signs of fraud
In many cases, credit card disputes arise due to fraud. If someone uses a stolen credit card to pay for products or services, the rightful owner will dispute the charge. Therefore, it is very important to take the necessary measures to protect yourself from fraud. Check for any suspicious details such as shipping and billing addresses that don’t match or incorrect credit card security codes. If you receive payments online, be sure to use well-known and credible payment processors such as PayPal.
5. Maintain good records
In order to fight chargeback successfully, you need to maintain accurate records of amounts and authorization details, as well as customers’ credit card transaction dates. It would also help to keep records of signed documents like contracts and receipts. Such records will come in handy when dealing with disputes from people who are trying to be fraudulent or those that have simply forgotten the details of the transaction.
Considering its potential negative effects, it is worth to invest your resources and time to fight chargeback. However, if you find the task overwhelming, it would be advisable to engage the services of a chargeback management firm.