A chargeback occurs when a buyer disputes a charge to his credit card issuer account. A chargeback fee is debited to the seller, and he is given a chance of defending the charge, but if the case is resolved favoring the buyer, those funds are gone for good because the transaction was not proved to be valid. Every merchant should be prepared for chargebacks, whether you are accepting payments online or taking mobile payments. It is impossible to stop customers from issuing chargebacks, but there are ways you can protect yourself from the financial losses and frustration.
Ways to Reduce Chargebacks
There are many effective ways to help merchants reduce chargebacks which include:
While some customers might do a little research when they do not recognize a charge, others will issue a chargeback immediately. Make sure you have a better way to keep in touch with this kind of customers. That means putting a phone number or email address on your website. This gives unhappy customers a chance to express their concerns which is also a good business practice.
Use a name that your customers will recognize
The name that displays on your customer’s online statements or credit card bills is your credit card descriptor. Use the name appearing on your website as the credit card descriptor if your site is branded using another name apart from your legal name. When a charge pops up on most customers statements a few days after the transaction, there are more chances that they won’t remember your legal name even if it appears in the footer of your website.
This is among the best ways to reduce chargebacks. In reality, chargebacks were introduced to protect customers against scammers, and that’s why they heavily favor your customers. If any customer is unhappy with your services or products, ensure they are going to get a refund in one way or another.
Don’t make a promise you can’t keep
Offering a lifetime membership to get customers sounds like a great idea when you are first starting out a business especially if the sing up cost is low. Sometimes you may be setting up yourself for failure because you will be promising to provide your services to them for their entire lifetime. If in future you decide to switch the company’s direction, this will lead to a lot of chargebacks.
Don’t hold onto your customers’ money
The longer the customer subscription money is in your possession before they get the service they paid for, the more time they have to issue a chargeback. Once it is released, your customer is issued with a full refund even if they have been using your services for a long time.
Things Sellers Can Do To Prevent Chargebacks
There are many ways to protect yourself from losses resulting from credit card chargebacks. Below are tips for preventing chargebacks.
- Understand why chargebacks occur.
- Use an accurate Payment Descriptor on your merchant account.
- Employ best practices for card-not-present and card-present charges.
- Use a reputable payment processor with seller protection and fraud detection features.
- Respond to customer complaints and issues.
- Post a clear return policy in-store, on receipts and websites.
- Record pertinent information for every sale with mobile forms.
- Use a chargeback protection service to verify transactions.
Merchants need to implement an effective chargeback management strategy which includes two important strategies; disputing and decreasing. Having a better prevention strategy will save you energy and time you may be spending disputing transactions.