For most retailers, credit card chargebacks are the most dreaded expenses of all. They are expensive and put a drain on your finances. They can cost merchants up to 1.47% of their total revenue. If you, too, as a merchant, are looking at preventing chargebacks, you are at the right place.
This article will discuss chargeback meaning and how you can prevent it. It will also give you hints on how you can resolve a chargeback dispute in your favor.
Table of Contents
- 1 Chargeback Explained
- 2 Preventive Measures
- 3 #1. Use A DBA
- 4 #2. Ease of Contact
- 5 #3. Use Banking Fraud Services
- 6 #4. Have A Robust Return Policy
- 7 #5. Avoid Splitting Declined Card Orders
- 8 #6. Ensure Quality At All Times
- 9 Resolving Chargeback Disputes
- 10 #1. Respond in Time
- 11 #2. Maintain Meticulous Records
A chargeback is when the amount paid by a customer via a debit or credit card is taken back by the bank. It is upon the customer’s request. Customers can request banks to effect a chargeback by filing a dispute for a particular transaction on their card. It can be when customers want to return the goods purchased or due to fraud.
You can prevent chargebacks by various measures. While difficult to get rid of completely, you can reduce the number of instances dramatically. The below-mentioned are the suggested ways to do so.
#1. Use A DBA
“Doing Business As” can go a long way in controlling the number of chargebacks you face. Usually, customers will file a dispute when they see a name they don’t recognize. They know the brand, but may be unaware of the company behind the brand. Therefore, you can add a DBA on every bill, which clearly states the company’s name beside the brand name.
#2. Ease of Contact
By printing your contact number at several locations on the bill, and on the customer’s statement, you can ensure that they call you first about the charge before they file a dispute. When their concern about the charges is put to rest, you will save yourself a chargeback.
#3. Use Banking Fraud Services
Most banks have multiple layers of protection regarding credit card transactions. You can make use of strict verification steps to avoid fraudulent transactions. They can include CVV2, address verification, use of OTP for each transaction, etc.
#4. Have A Robust Return Policy
Another reason for chargebacks is when customers don’t like the goods received due to substandard quality or incorrect description. In such cases, you can have a robust return policy that indicates how the amount will be refunded to the customer. This will prevent them from filing a dispute.
#5. Avoid Splitting Declined Card Orders
When a card is declined due to insufficient balance, customers may request to split the two cards’ charges. This may be the sign of fraud, and it is best if you take additional steps to verify that the cardholder is authorizing these transactions. When in doubt, don’t approve the split.
#6. Ensure Quality At All Times
When you provide quality products and services, there will be little room for returns and refunds. It will save you precious chargeback, meaning you can focus on improving your sales.
Resolving Chargeback Disputes
If a customer does file a chargeback, there are ways by which you can ensure that the resolution is in your favor. These tips will guide you towards a favorable chargeback resolution.
#1. Respond in Time
The authorities responsible for investigating chargebacks will send you a notice. By responding on time, you ensure that you catch up and instill trust with the authorities as a reliable merchant.
#2. Maintain Meticulous Records
Information is key when fighting chargebacks. You need to ensure that you provide all the information about the various verification methods used before the transaction was carried out. Also, have the receipts, date, and time logs for the transaction ready. When you can prove that you verified the customer before charging their card, you can win the dispute.
Chargebacks are a reality that you, as a retailer, need to live with. With digital payments taking precedence over other forms of remittances, you have to be highly vigilant about frauds. Excessive chargeback results in loss of reputation, high transaction fees, and inappropriate use of human resources. Therefore, using the above precautionary measures can help you avoid them to a great extent.