Chargebacks are something that almost every merchant will deal with at some point. Sometimes they are warranted and other times they aren’t. You always want to avoid chargebacks whenever possible because they can have many negative effects on your business. While there will also be chargebacks that can’t be avoided, a majority of them can be with just a few simple measures. Understanding chargebacks and how they work will allow you to work to prevent them and be better prepared if you have to deal with them.
A chargeback is a reversal of a payment made by credit or debit card. It occurs when a customer disputes a charge. They can be made for a variety of different reasons and they can end up costing merchants a lot of money.
If you are a merchant and are worried about how chargebacks may affect you, curious about the chargeback process, or want to learn how to avoid chargebacks, read on to learn more.
Chargebacks can hurt any business, especially small businesses. When a merchant is hit with a chargeback, they don’t just have to pay back the amount owed, they also have to pay fees associated with the investigation of the chargeback.
Even if the merchant prevails, they are still stuck with the chargeback fee. Not only do chargebacks affect the amount of money a business makes, it can also affect their reputation. Customers don’t want to have to file chargebacks to get results. They want to be able to work with the merchant to resolve the issue. If you want to make sure your business stays successful, you should try to avoid chargebacks at all costs.
There are many reasons a customer may file a chargeback, and many of them are avoidable as long as the merchant is willing to work with the customer. Knowing the common reasons customers file chargebacks, can help you prevent them.
If the card is processed and has expired, the bank will catch it and file a chargeback. The best way for merchants to avoid this is to always check the expiration date on a card before trying to process it. A processing service will also perform this check to make sure the card isn’t expired and will prevent the transaction from going through if there is a problem.
If customers aren’t happy with the products or services they receive, and the merchant isn’t willing to make things right, they may file a chargeback.
Credit card fraud is very common and one of the biggest reasons chargebacks are filed. Verifying credit cards can help prevent fraud and any chargebacks associated with it.
Chargebacks follow a process and can take some time to complete. They are handled and resolved with the following steps:
Once a customer files a chargeback, it goes into review. During this time, the merchant will be made aware that a chargeback has been filed. This is the time to pull records and have them ready to present.
During the investigation, the bank will investigate the customer’s claim and review the dispute and the reasons for it. Once the bank decides that the action is valid, it will go to the next phase. If they find it invalid, the case is closed.
Both the merchant and the processor will have the ability to review the chargeback case and see the details. They can also approve or dispute it.
Once all the reviews are complete, the bank will make a final decision and either:
In most cases, the merchant will be required to pay the investigation fee even if the case is invalidated.
If you don’t want to have to deal with the stress of a chargeback, you can avoid them. Here are some tips that can help:
You want to make sure you have good communication with your shoppers and that your contact information is easy for them to find. Most shoppers will attempt to contact the merchant if there is an issue before they file for a chargeback. If they aren’t able to contact you or if you fail to respond, that’s when they will likely move forward with the chargeback.
By talking with your customers, you can resolve the issue without any need for them to file a chargeback. This also improves your chances of keeping them as a customer in the future and can save your reputation.
People often file chargebacks when they feel they have been scammed or bought something that wasn’t as described. If you describe your products and services properly, your customers won’t be let down and will be less likely to file a chargeback against you.
If you want to allow your customers to return products that they aren’t happy with, you need to have a clear return policy. Again, this lets the customer know what to expect and lets them know that they can return the product for certain reasons, instead of filing a chargeback. You may also offer an exchange policy.
If you want to avoid chargebacks caused by fraud, you need to make sure you verify every credit card. You can do this by working with a credit card processor that you trust and making sure your equipment and software are updated often.
Always save receipts as they are used to prove that the purchase was made. When a chargeback is filed, the customer may claim that they had no knowledge of the purchase and didn’t make it. Your receipt can show that the purchase was made. This can also come in handy if there is a fraud incident.
If you need help fighting chargebacks, be sure to choose the largest credit card processors who can help. HighRiskPay.com is here to help you.