What Is a Chargeback and What Can You Do About It?
A chargeback is when a customer disputes a payment that has been made with their card to purchase something at your store, especially a digital product. It is crucial to know how to prevent chargebacks because they can hurt your business in more ways than one. The bad news here is that you cannot completely avoid these claims. However, there are some steps you can take to prevent chargebacks.
Two Important Reasons for Preventing Chargebacks
There are two main reasons why you need to prevent chargebacks the right way:
1. They Cost Money
First of all, chargebacks mean that you have to lose money. When you lose such a claim made by one of your customers, you have to pay them back the money they originally paid for your product or service. But that’s not all. Often, you will incur additional charges in the form of fees, for example. So, you not only lose your product and pay the customer back, but you must also bear extra costs, which can sometimes double the original amount. And if you offer a subscription-based product, you also lose the future monthly revenue that you may have anticipated receiving from the lost subscription.
2. They Damage Reputation
When you face too many chargebacks, the chargeback rate of your business increases. This metric is used by different financial service companies to determine your reputation when you want to get a loan or another service. The maximum acceptable level is usually 1%. If it gets higher, your merchant account can face termination.
Prevent Chargebacks with These 7 Simple Tips
It is very important to know how to prevent chargebacks whenever possible. Luckily, there are some simple steps you can take to do so.
1. Clarify Your Return Policy
A lot of people who file for chargebacks directly with their banks do so because it is very easy. The goal is to provide your customers with a clear and simple return and dispute policy. Here’s how you can make it easier for people to get in touch with you:
- Dedicated Returns Page: Detail your return policy and make it easy to understand. Mention the steps your customers need to take to return a product.
- Add FAQs: To make things easier, provide some FAQs so that customers can quickly get their answers.
- Ask for Reviews: Just like you ask for product reviews, ask those who have returned something to review the actual return and refund process. It will encourage others to do the same when something is wrong instead of going to their bank to dispute a charge.
- Minimize Customer Expense: Offer free return shipping to customers. It will cost you money, but far less than a chargeback.
2. Offer Solid Customer Support
A customer can file for a chargeback with their bank if they aren’t happy with their product and cannot get in touch with you. A lot of merchants, especially those with smaller businesses, don’t take customer support seriously, which ends up hurting them. Here’s what you can do:
- Get in Touch: After someone makes a purchase, send them a friendly email to ask if they’re satisfied with their product or service.
- Provide Multiple Options: Providing an email address to get in touch with you is the very least you should do. On top of that, adding a phone number for quick communication or a live chat option can help you keep your customers happy.
- Clarify Response Times: Make sure you let your customers know how long it’ll take for you to respond. This way, they will know what to expect and won’t think you’re ignoring their complaints/questions.
3. Train Your Staff
You can avoid difficult situations if you have the right kind of people working for you. Train your employees to help them prevent chargebacks before they occur. They should be able to recognize transactions that are suspicious and also collect evidence to fight a dispute. But before any of that, your employees should be able to reach out to a customer. This way, they can resolve the issue directly as soon as they find out that a charge has been disputed.
4. Understand the Data
Your POS system should be integrated with your payment solutions to provide you with crucial data related to chargebacks. You should be able to collect and analyze this data to find out trends and instances of fraudulent claims from customers. Keeping a close eye on this aspect of your business can give you a lot of information. It will also aid you in preventing chargebacks because you’ll be able to foresee if something like that is likely to happen.
5. Use Secure Payment Protocols
An increasing number of disputes when using Mastercard and VISA can be seen in CNP (card-not-present) payments. These are made during online purchases and can be avoided by using certain protocols. This is where multi-layered payment protocols come in. They are vital to be incorporated in transaction processes for any business that wants to prevent chargebacks. Here are some of the helpful approaches you can use:
- Address verification system
- CVV codes for verifying cards
- Alerts to prevent chargebacks
- Billing as well as shipping address confirmations
- Fingerprint authorization
- Reverse lookups for phone numbers
- Verification methods for email addresses
6. Use Delivery Confirmation
Many fraudulent claims from customers revolve around telling their bank that they never received the product they paid for. To minimize this, make sure to provide delivery confirmation. The more transparent your delivery and payment processes are, the more information you can show the bank in the case of any dispute. One way to do this is to ask every customer to review your product or inform if they have any issues with their purchase. You can do it in a separate email after the delivery is done.
7. Manage Expectations
One of the simplest things you can do to prevent chargebacks is to manage your customers’ expectations by providing them with clear product specifications, response times, additional charges, etc. The more clear and honest you are with your customers, the fewer chargebacks you will face due to disappointed buyers.
Use Chargebackhit to Manage Chargebacks
Many merchants decide not to fight these claims because it takes time and money to do so. But it is important to manage chargebacks by actively taking part in the process because, over time, these claims can lead to a significant loss of your revenue.
The easiest way to manage chargebacks is to use a service like Chargebackhit. We can ensure you can prevent chargebacks and fight such claims to resolve them as quickly as possible. We help merchants build a strong case for themselves if the dispute gets to a point where you need to fight it. They use various pieces of evidence to increase your win rate in such cases.
If you want to get some custom help from professionals to manage chargebacks, get in touch about our solution. You’ll be able to increase your ROI and save money significantly.
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