Ah, chargebacks, the bane of the small business owner’s world. The term describes the charge levied against a merchant when a customer contests a transaction made on their credit card. Costly, timely and a general source of frustration, businesses owners should do everything they can to avoid as many of them as possible.
Here are five common reasons consumers request chargebacks and what you can do to avoid them.
Unfortunately, most chargebacks are due to fraud. Studies vary as to how wide the problem is, but some reports show that 50 percent of chargebacks are fraudulent, while others say the rate of fraudulent chargebacks may be as high as 86 percent.
Solution: Upgrade your payment processor to accept EMV technology, which will help prevent fraud and eliminate some of your liability.
“I Never Got It”
Also, often under the fraud umbrella, are people who will claim they never received a product you shipped.
Solution: If you ship merchandise, make sure you use a carrier that will provide proof of delivery, including a signature for expensive merchandise. That way customers can’t say they didn’t receive something they did, and you can help track down items that were delivered to the wrong address.
Sometimes legit chargebacks happen when a customer is charged multiple times for one item or charged an incorrect price.
Solution: Mistakes will inevitably happen, but training and reminding staff to be careful and diligent when completing transactions can help minimize them. Also, providing excellent customer service will hopefully encourage customers to come directly to you instead of starting the chargeback process with their credit card issuer.
Often customers will look through their bank statements and call to report a charge they don’t recognize. This is especially prone to happen if your business name doesn't appear on their bank statement with a recognizable name.
Solution: Use your company’s name (not a parent company name or abbreviation) on banking statements. You can also include a telephone number so they can call you directly to discuss an unknown charge.
“That’s Not What I Wanted”
In some cases, a customer will be unhappy with a product or service received (sometimes after your refund period has expired), and instead of contacting your business directly, they will request a chargeback.
Solution: Clearly state your return and exchange policy and respond quickly to any requests or complaints. It will eliminate a lot of unnecessary time and expense if you can address their concerns directly.
While chargebacks will likely always be an inevitable part of doing business, these steps will help keep them (and your headaches) to a minimum.