Preventing and Reducing Chargebacks

Chargebacks can ruin your Business. Learn how to prevent losses and reduce chargebacks with SecureGlobalPay and keep your business running efficiently, even in the most difficult of economic times. Preventing and reducing chargebacks and most importantly, avoiding disputes is key to any business continuity program. 

The same process of accepting credit cards to bring additional revenue into your business, can also bring trouble to your doorstep. If a customer disputes a credit card transaction, you have just unwillingly entered into the chargeback process. 

It doesn’t take a large percentage of chargebacks to get noticed by your payment processor. The percentage of chargebacks is based on your overall transaction volume. If they are high, you will accrue penalties, fines and eventually be shut down..Preventing chargebacks is a must for any business ever business owner. 

The cost of chargebacks can be high on many levels. Fees and fines can range anywhere from $20 to $100. These fees are used to cover the cost and overhead associated with the chargeback process. These charges can be levied by banks, credit card companies and online payment processors. 

The problem is not really about the additional fees. It’s more about your ability to prevent losses and continue to accept credit card payments while running your business. Learn what the acceptable chargeback rate is for your particular business type and stay ahead of the game. 

Merchants are ultimately the biggest losers in the chargeback process. Once a transaction becomes a chargeback, the merchant must absorb all costs including processing and shipping. Chargebacks also enable banks to seize funds from a merchant’s account. Avoiding disputes are always a merchants best bet.

Once a sufficient volume of chargebacks has been reached, the merchant becomes a liability to the bank and payment processor. Accruing sufficient penalties can lead to cancellation of your merchant account.

Merchants must nip chargebacks in the bud to help prevent losses before they become a catastrophic problem. Here’s how.

Preventing Chargebacks and Avoiding Disputes: A Step-by-Step Guide

Merchants can help prevent losses and take the necessary steps to avoid chargebacks at every stage of the transaction process. The following generic chargeback prevention suggestions can be used by most businesses to decrease their chargeback ratio.

Before the sale

Transparency and clear communication start the moment you open your business. Have you taken these steps?

• Website. Ensure your name, contact information and refund policies are clearly listed on your company website to avoid confusion.
• Accurate descriptions. Be sure to include accurate photographs and descriptions of products and services if you are an online retailer.
• Business communications. Include contact information and other appropriate info on all official business communications. This includes emails, statements, bills, receipts, follow-ups and customer satisfaction surveys.
• Check-stations. Install check-stations in your online purchasing system. Require customers to acknowledge they have read your refund policy by checking a box before their payment can be processed.

Taking these steps at the outset will give you the advantage when fighting chargebacks.

During the Sale

Take the following steps to decrease the likelihood of chargebacks at the point of sale.

• Customer info. Be sure to record all customer info related to the transaction. This includes customer name, address, telephone number and e-mail information. Also obtain credit card information and, if possible, the IP address of the customer computer. 
• Customer address. It is possible to verify a customer’s name, address and phone number with the card issuing bank. Call the Voice Authorization Center to verify customer addresses and obtain documentation you have done so.
• Verify credit card info. Ensure customer name, address and e-mail info match that of the credit card company. Obtain expiration date and CVV code.
• Expired credit cards. Never accept an expired credit card.
• Magstripe vs. chip cards. While most customers have chip cards, some older credit cards are still “magstripe” (or “swipe”) only. Be sure to obtain digital impressions of customer signatures for transactions involving magstripe cards.
• Obtain authorization for the full amount. Declined transactions should not be accepted and re-processed as multiple, smaller transactions as this can signal fraud.
• Red flags. Be aware of red flags during the sale. Foreign orders or orders with domestic billing addresses and foreign shipping addresses are suspicious. Similarly, orders for which customers offer to pay more for faster delivery can signal fraud.

During Processing

Fight chargebacks during the processing phase of the transaction.

• Set shipping expectations. Be very clear with the customer about shipping costs, terms and conditions. Give them an accurate estimate for likely delivery and provide them with tracking info.
• Large orders. Call and verify customer name and contact info for large or particularly expensive orders before shipping.
• Charging the customer. Wait until goods are shipped before charging a customer’s credit card.
• Fraud tools. Make use of any fraud prevention tools made available by your bank or online processing provider.

Customer Service

• Availability. Have knowledgeable, helpful customer service staff available to address any customer concerns and establish a mutually beneficial solution.
• Reduce friction. Train customer service representatives to be sympathetic and generous with customers. Eliminate any unnecessary obstacles to their satisfaction.
• “No strings attached.” Enact a “no strings attached” policy for cancellation and refunds.
• Refunds. Offer refunds quickly and generously. They are less expensive to your business in the long run.

After-Care

• Proof of delivery. Always obtain signed proof of delivery.
• Respond quickly. A limited amount of time (10 business days at most) is available to resolve a chargeback. If you miss the window of opportunity to respond, you forfeit your ability to fight the chargeback.

A commitment to your business means a commitment to protecting your assets and your ability to process payments. Having a plan in place to address and fight chargebacks should be an essential component of your business plan.

Fighting chargebacks and avoiding disputes happens at every stage of the sales process. It involves all employees, managers, directors and requires everyone to do their part. Implement the safeguards necessary to help your business grow and succeed.