When it comes to credit card processing, chargebacks can be one of the most exasperating problems faced by merchants. No business owner wants to have a huge loss come out of their bank account. When your company receives a chargeback notification, it is because your customer has filed an alleged complaint with their card issuing bank. While it might sound unfair, the burden of proof is then placed on the business owner to provide evidence of the legitimate transaction. The process of disputing a chargeback takes valuable time away from customer service and accounting personnel. Therefore, a chargeback on a small transaction amount will wipe out any profit margin made, even when the issuing bank sides with the merchant. On large transactions, fighting the customer for payment can cut into your cash flow while the dispute is being resolved. On top of all that, too many chargebacks may result in higher merchant account fees or hefty fines if chargebacks exceed 1% of processed dollar volume.
Preventing chargebacks is essential in any business, and at Capital Processing Network we have identified several ways for our merchants to avoid expensive tangles with credit card companies:
- Make Customer Service a Priority. In many cases customers may choose to charge back if they do not get a refund quickly enough, or if a duplicate transaction is not immediately reversed. If customers feel they are getting the runaround, they may simply choose make a dispute with the credit card company.
- Have Clear Terms and Return Policies. Customers who dispute legitimate transactions are likely to state that they were not aware of a restocking fee, return shipping charges, or a limited warranty. Making allowances for buyer’s remorse can go a long way to preventing chargebacks.
- Reduce Fraud. If you accept credit cards in person, look for a hologram on the card, and compare the cardholder signature to the one on the receipt. If you accept cards online or over the phone, ask for the CVV code (the numbers on the back of the card) or use AVS address verification to make sure the person you are talking to knows the billing address of the card. If the transaction seems suspicious, proceed with caution.
- Require Signatures on Delivery. For delivered products, chargebacks can be avoided if customer service reps can look up a delivery date, signature, and other data that establishes the whereabouts of the package. For services, the signature of the person approving the work establishes that a job has been done to the customer’s satisfaction.
- Avoid Surprises. If you use a third party to process credit cards, or do business under a DBA, make sure clients know what company name will show up on the statement. If there are recurring charges, make sure the customer has to check a box approving of the charge.
Any business that accepts credit cards, or relies heavily on revenue from debit and credit card transactions, needs to be proactive when it comes to avoiding chargebacks. Unfortunately, this means that sometimes it is necessary to absorb expenses like restocking fees and the cost of a return in exchange for lower merchant account fees and fewer disputes. However, many Capital Processing Network customers have found benefits in a sharper approach to customer service and fraud prevention. Customers who see a “no hassle” return policy are likely to make more purchases from the same store and leave positive reviews on other websites. Improved fraud prevention has a direct impact on your profitability, since you end up absorbing fraudulent charges with or without a customer chargeback. No matter whether you accept credit cards in person or online, fewer chargebacks will help keep your merchant account fees low while they save you valuable time.