Prevent Chargebacks from Eating Your Profits

Wednesday, July 25th, 2012
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Tired of dealing with disputed transactions? Chargebacks seem to be one of the most frustrating situations for a merchant specifically because it can be costly. The most common reasons why merchants face chargebacks are: returned merchandise, terminated services, disputes, errors, or fraud [i]. The risk of chargebacks can be reduced if the merchant follows these easy yet highly effective steps which will result in the customer’s satisfaction and transaction accuracy.

Tips to help you avoid chargebacks:

• Show your policies: Begin by placing links to customer-friendly return/cancellation policy, shipping policy (include link to shipping costs), and billing policy. Make sure this information is easy to understand and easy to find throughout your website. Allow your customers to review the policy rules and fees before submitting their credit card payment during checkout. As a second precautionary measure, add your policy links into your confirmation email (and/or invoice). The third precautionary measure you should consider is adding the refund/cancellation policy on your check-out screen with an “I agree” button so that the customer must agree to the terms to complete the transaction. If you do not give refunds or offer in-store credit only, this information should be clearly stated as well [ii].

• Up-to-date order status: Provide your customers with a way to see their order status. Consider going the extra step by proactively sending your customers up-to-date information including shipment updates and tracking numbers which will not only provide your customers updates about their orders but will also provide an online tracking service and proof of delivery that helps to protect you against claims of non-delivery [iii].

• Product descriptions: Create detailed yet realistic expectations by providing accurate product descriptions. Creating product descriptions that contain exaggerated information could lead to a customer with high expectations, which could result in a chargeback. Well-written product descriptions prevent unsatisfied customers and assure your customer will also have an enjoyable experience [ii].

• Customer service: Display your contact information (including a phone number) on every page of your website. This provides a sense of trust and allows the customer the opportunity to easily contact you to handle any issues before contacting their credit card company [ii].

• IP addresses: Capturing and limiting IP addresses are powerful weapons against fraud and hacking. Capturing IP addresses of your orders should be one layer of security. Also consider limiting what countries can access your store by imposing restrictions based on IP Address [iii].

• Credit refunds: Create a habit of quickly processing refunds to your customers. Refunds must be made using the same credit card as the original sale. The card purchase must not be refunded by cash or check [iii].

• CVV: When performing authorizations, require customers to enter Card Validation Values (CVV). Asking for the CVV adds an additional layer of fraud protection by virtually requiring the customer to have the card in hand when placing the order [iii].

Following these tips can help you save valuable time and money by avoiding chargebacks altogether. Providing a thoroughly thought out website with clear policies for successful communication will help retain loyal customers.

Spending too much on merchant fees? Get a better rate

[i] http://www.newmerchantassist.com/minimizing-costs/chargebacks.aspx
[ii] http://www.merchantdoctor.net/index.php/site/blog_detail/38
[iii] http://blog.templatemonster.com/2012/06/26/how-to-avoid-chargeback-ecommerce-tips/

Shauna has a background in information technology and is currently a Senior Account Executive at Nexternal . She has been creating and cultivating client relationships with brands since 2007, offering her clients both eCommerce and online marketing insight.

One Comment

  1. Requiring Signature Confirmation of delivery is the *only* way to fight chargebacks. Card issuers only care about one thing- Signature Confirmation. Otherwise the charge-back fraudsters will win every time.

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