Chargeback Prevention Tools That Work

The chargeback process is meant to increase consumer confidence. It makes it easy for cardholders to dispute charges. When chargebacks occur, they can cause losses in revenue and tarnish a company’s reputation with credit processors. Chargeback prevention may seem daunting at first, but it is an essential task to help maintain revenue, and protect yourself against future chargeback disputes.

What Exactly IS A Chargeback?

A chargeback happens when a customer disputes a charge on a credit card bill in the hopes of securing a refund. A chargeback then voids the credit card transaction, withdrawing funds previously deposited into the merchant’s bank account, and applies the credit to the customer’s card.

While this might not seem fair, you can fight the chargeback. While fighting chargebacks is a necessity of doing business, merchants must also be proactive by limiting the risks of chargebacks in the first place. Below are several strategies that you, as a merchant, can implement to help with chargeback prevention.

Seven Ways Merchants Can Prevent Chargebacks

1. Find out why chargebacks are happening in the first place.

In order to prevent chargebacks from happening, it’s important to understand WHY they are occurring in the first place.  Fraud isn’t the only reason consumers file chargebacks. While every business is different, it’s important to understand some of the most common reasons chargebacks occur so that you can limit them as much as possible.

  1. Customers did not receive the goods promised. This chargeback occurs when the merchant has not supplied the merchandise at all.  It may also mean that the customer may have misunderstood their purchase. In addition, items being delivered to a consumer’s house can also, on occasion, go missing. When shipping operations are disorganized, or packages take weeks to ship, chargebacks are more likely.
  2. The received item was not as described. When ordering online, customers cannot hold the item in their hands, feel the material, examine the product. When product descriptions are vague or deliberately mislead the customer, the odds of a chargeback are higher.
  3. Customer feels they were incorrectly billed. Customers often don’t realize they are being charged for shipping, or face an additional service charge. When itemized, detailed receipts are not given, consumers are more likely to file chargebacks.
  4. Customer doesn’t remember or recognize a specific charge on their statement. When shopping online, it’s easy to forget what website or company the items are purchased from. If a customer does not recognize the purchase or the company, chargebacks can occur. Accurate company names on receipts can limit these types of chargebacks, which brings us to our next point…

2. Use Best Possible Billing Descriptors

If your billing name is different than your business name, you have a few options. You can either make this clearly known to your customers, or ask your processor to replace your legal name with something customers will recognize. If your name is too long and surpasses the allowable character count, try abbreviating to avoid confusion. Customers may forget about their order. Having clear and recognizable billing descriptors will help jog customers’ memories, and prevent chargebacks from happening.

3. Provide Stellar Customer Service

These days, customers expect prompt responses to questions and concerns. If customers cannot get in contact with you, they’re more likely to file a chargeback.  To help with your chargeback prevention, consider a live chat on your website. With live chat, you can potentially resolve issues in real time, before they become a dispute. Make sure to answer emails promptly.  Monitor social media–consumers use social media through the day and consider it a major form of communication. Be prepared to handle customer questions on social media the same as you would in an email. Make sure contact information in all forms is clearly visible on the website. If customers know how to reach you and can do so easily, it diminishes the potential for chargebacks.

4. Have Clear Cancellation and Return Policies

Make sure your cancellation and return policies are clearly visible on every part of the website. Also, having your customers check a box ensuring they have read the policies will also help to prevent chargebacks. Make sure the policies are easy to read and understand. If customers are aware of the policies, chargebacks are less likely.

5. Keep Detailed Records

When disputing a chargeback, you will have to provide compelling evidence. If you do not have the appropriate records from the very beginning, you’re unlikely to win a chargeback dispute. Record and keep documentation of the sales receipt, order forms, delivery tracking numbers and delivery confirmation to ensure an illegitimate chargeback is not successful.

6. Don’t Fight Every Chargeback

Even when you utilize the various prevention tools, chargebacks can still occur. However, not all chargebacks are winnable, or even worth fighting. If the cost of the item is less than the cost of the dispute, don’t fight it. If you don’t think you have a good chance of winning, accept the chargeback. It’s important to be selective about which chargebacks you dispute. 

7. Know Your Company: Are YOU At Risk?

If you sell products online, you are at risk for chargebacks. There’s a higher chance of card-not-present scenarios, and there’s really no way for you to verify if the person purchasing the goods is the same person whose name is on the card. But is your company high-risk? Some companies are considered high-risk because of the products they sell. Some examples include tech gear, designer purses, expensive watches, and magazine subscriptions. Expensive items that can be purchased with a stolen credit card and quickly resold for cash are more susceptible to fraud.

Whether your company fits the high-risk profile or not, be wary of online orders that are extremely large or extremely small. Criminals will often buy items in bulk or make multiple large purchases in a short amount of time if the first one goes undetected. Check all orders that may seem suspicious – whether you’re high-risk or not.

There are lots of other chargeback prevention tools you should be utilizing to protect your business. Stop fraudsters in their tracks by being properly prepared.

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