Being an entrepreneur is both a challenging and rewarding experience. Unforeseen circumstances, such as chargebacks, can feel intimidating and put a damper on day-to-day dealings. Fortunately, we have solutions to help you overcome the hurdles that chargebacks can throw your way. Read on to learn more about chargebacks and how Merchantech can support your business.
All parties involved in payment processing services, including banks, card networks, and others, constantly work to reduce fraud and loss. Chargeback procedures are merely one type of mitigation.
Merchants need to be made aware of what a chargeback is, why they occur, what to do when they do, and how to avoid them when possible. We will share everything you need to know about credit card chargebacks based on what we've discovered through years of experience as payment processors in the industry.
When there is a problem with a purchase that has been made using your credit card, and you are unable to resolve the issue with the merchant, you can initiate a chargeback with your bank as a tool to try to get your money back. If the merchant or service provider who charged you doesn't give you a refund, you file a dispute with your credit card company.
Your card company investigates your claim after receiving a chargeback dispute and gives the retailer who handled the transaction a chance to respond. If necessary, your issuing bank may also involve the credit card network (Visa, Mastercard, American Express, or Discover). The disputed charge will be refunded to the cardholder if the issuing bank's investigation rules in favor of the cardholder or if it rules in favor of the merchant, the charge will not be refunded.
Chargebacks associated with credit card processing can be a major burden for business owners. Chargebacks are, at best, the result of misunderstandings or confusion (such as when a consumer doesn't recognize your company name). If you can demonstrate that you provided the goods or service in question, you may be able to appeal these decisions, but this process can be time-consuming and may not be worthwhile.
Chargebacks, at worst result from consumer fraud (i.e., the consumer intentionally lies to avoid paying). They might make it more difficult for a company to keep a merchant account open and continue to accept credit card payments. A company's reputation may suffer if its chargeback rate is high (above 1%), and merchant account providers may levy heavy fines or even close the merchant account.
Unfortunately, retailers have few safeguards available to help them combat chargebacks. Even if your business has a "no return" policy, chargebacks are still permitted per the Fair Credit Billing Act. Despite this, it's a good idea to make buyers aware of your sales regulations and clearly state your return policy. This normally aids in battling chargebacks and may become relevant if a chargeback ever goes through an arbitration process.
In the majority of chargeback disputes, banks reportedly tend to side with the cardholder rather than the business owner. Because of this, retailers must use every effort to ensure that all purchases and transactions are thoroughly recorded and strictly adhere to the guidelines established by the card networks.
Chargebacks were developed as a means of defending consumers against fraudulent transactions. But before we can comprehend how crucial it is for a business to lower chargebacks, we need to consider the factors that lead to them in the first place.
Sometimes, the person requests a chargeback because of a transaction they do not recognize.
Sometimes even if the transaction was legitimate, customers filed chargebacks for other potential reasons such as the ones listed below.
With competition in e-commerce rising, customer service is the defining factor that distinguishes successful sellers.
The days of having an e-commerce website that lists frequently asked questions are over. Customers anticipate speaking with a live person who can promptly and accurately respond to their questions. Businesses should provide live, round-the-clock help. The fewer purchase errors made by consumers, who could file chargebacks, the more service and support there is.
Increasing customer care capabilities may cost money in the short-term, but the long-term benefits i.e fewer chargebacks and more satisfied customers make it worthwhile.
The merchant descriptor, or statement descriptor, is the name customers will see on their billing statement. Customers are more likely to file a fraudulent chargeback if they cannot identify the name of a business.
For example an organization called Greenwich,but has a merchant descriptor as Peter England will likely incur a chargeback. Including your doing-business-as name, website, and phone number in a suitable billing descriptor can help avoid these unnecessary chargebacks.
If the card is expired, the transaction will never be approved.
Make sure to set up fraud controls to verify credit card billing zip code and shipping address. Use the address verification service offered by your Payment Processor and Gateway to ensure the billing address and shipping address match. If a credit card billing address is in the USA and the shipping address is in Nigeria, you should be cautious about shipping the item before taking additional steps to verify the transaction is legitimate, especially if it's an order from a new customer.
Establishing a transparent return policy is an important tool in communicating your terms of service with customers. Return policies should be prominently displayed at checkouts and listed on your website. Be detailed, include the return window, restocking fees, and exclusions in your return policy.
Ensure that your customer contact information is accurate and current. Verify the client's mobile phone number, email address, or any additional information relevant to the order by contacting the customer. Many customers anticipate receiving a confirmation email or SMS on their mobile devices. Taking the time to validate credit card information not only gives you peace of mind, but also protects the customer from fraud.
Overcharging, double billing, or erroneous billing amounts can also lead to unnecessary chargebacks. Although human error is inevitable, you can reduce mistakes by following safe card processing procedures.
Use printed receipts or your payment gateway to double and triple-check the amount charged to the customer. Only run the card once, do not try forcing a transaction by running it multiple times in hopes of getting an approval. Instead, request another form of payment.
Consumer chargeback fraud is more prevalent than ever. It has become increasingly easy to make a purchase, (particularly online), and then report it to the issuing bank as a fraudulent transaction. As a result businesses lose billions of dollars each year in lost goods, transaction reversals, and chargeback costs.
Merchants typically lose these types of disputes , because many companies do not keep straightforward records.
A thorough and legible sales receipt can serve as a reliable piece of evidence in case of a chargeback dispute.
Cases of fraud, where thieves use stolen credit card information to make purchases also result in chargebacks. Use fraud prevention tools offered by your payment processor and/or Gateway that make sense for your company, and protect yourself and your customers against fraud.
These resources may consist of the following:
There is no question that customer security and welfare should come first, but the above-mentioned vital chargeback prevention strategies can help enhance transaction security, and spare merchants from a double loss.
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