At Christmastime, workplaces often have White Elephant gift exchanges where gag gifts are passed around. Sometimes, a gift makes an appearance year after year – for example, in my workplace, a Justin Bieber backpack just keeps returning, like a bad dream.
Chargebacks are kind of like that – a transaction comes back around and just like that Bieber backpack, it’s not in a good way. They cost you both money and time, and excessive chargebacks can lead to a merchant account shutdown. Not to mention the numerous fees and penalties that can be associated with a chargeback like retrieval requests ($5-15), chargeback fees ($15-$50), and the potential to have a chargeback monitoring system administered by the card brands for up to $5,000 if your chargeback ratio gets too high. Merchant account shutdowns can lead more and more expensive “high risk merchant accounts” due to TMF (terminated Merchant File) or being added to the MATCH list (Member Alert to Control High Risk) making it nearly impossible to accept credit cards again.
However, chargebacks can be avoidable or minimized. There are several simple steps you can take to avoid chargebacks.
First, have a clear and consumer friendly return and cancellation policy if your customer decides that the item is not what he or she wanted. Be sure to have a phone number and email address prominently displayed on all communications with the customer. You want to make a return easy so that the customer doesn’t call his or her bank to dispute the charge.
Also, there are some ways to prevent chargebacks that prevent fraudulent card not present transactions. For example, verify the CVC2 and CVV2 numbers that are on credit cards. This is a three-digit code that isn’t captured in the magnetic strip and is only available on the card. If you accept payments online, this is a proven way to reduce fraudulent transactions. You can go even further with security measures by using address verification systems. These systems check the address information entered on an order against the address on the cardholder’s account. Thieves are stopped dead in their tracks and so are your chargebacks!
Communication was discussed earlier but another simple way to prevent chargebacks is to have a customer service outlet for customers to contact you with any problems. You can use your own phone number or service because clear and quick communication is proven to reduce chargebacks. A system like Verifi’s Cardholder Dispute Resolution Network can be very helpful in resolving potential chargebacks before they happen. This service reroutes customer issues directly to you instead of the bank so that you can work with the customer to reach a resolution and hopefully avoid a chargeback. Bankcard Brokers can get your business set up on this service.
Sometimes, customers sign up for automated services or products. This might lead to chargebacks because customers simply forgot they signed up or they forgot to cancel by a specified date. To avoid this, provide your customer notification and plenty of time before their regular shipment to cancel the service or product. Also, be sure to have a disclosure or agreement that the consumer signs prior to the first purchase. You’ll avoid wasting time and money in the long run by being prepared and once again communicating clearly and transparently with your customer.
Another way to prevent chargebacks is by providing clear and concise information about your products or services. If you sell products, take several photos of the item so your customer can really get familiar with the item. Do not oversell the reality of your product. Oftentimes, chargebacks result because a customer really didn’t have the proper expectation of the item.
Really, what we’re talking about here is just being honest and providing full disclosure on your website about what you’re selling and how you’re selling it. Be clear with customers on shipping and billing policies, and make sure they know what name the charge will appear on their bill. The more you can provide information on what a customer can expect, the less your chance of a chargeback.
Now for a few bonus suggestions! “Friendly Fraud” has become a serious threat to eCommerce merchants. Friendly Fraud is simply when a consumer wants something for Free. They do this by abusing the chargeback systems that was put in place to protect them from fraud. A few ways to prevent friendly fraud, or at least fight it, are to have a very clear check out process. Sometimes merchants will employ a verification system through email or SMS to confirm identity prior to purchase. This “double opt in” helps to prove the customer’s intention to purchase. More expensive shipping methods can be effective as well. Requiring signature upon receipt and delivery confirmation help to prove that they actually received their package. These actions combined with clear communication, accurate product descriptions and disclosures, robust checkout security, and good customer service are your best defense.
Bankcard Brokers is an established, reliable merchant services company. Our ETA – Certified Payment Professionals can help you accept credit cards online, as well as provide superior merchant services for your company with a merchant account that will have features built in to help prevent chargebacks; increasing your profits, and saving you time. Get started today with our simple online application and a FREE robust payment gateway. Download our checklist as a handy resource for avoiding chargebacks.