If you want to make a small business owner upset, the lone mention of a chargeback can almost send their day into a tailspin. The process of when a customer asks the bank to reverse charges on a purchase is meant to protect consumers from fraudulent charges to their account – which is great in theory. The reality is chargebacks are a complicated process for businesses and have provided a way for some consumers to scam businesses. The dispute management process is ripe for improvement, as consumers have become more apt to file chargebacks with the rise in e-commerce fraud.
Unfortunately for businesses, the process is not set up in their favor and they are essentially guilty until proven innocent. How does a chargeback work? The cardholder or issuing bank begins the dispute process with the business. Then, the chargeback department at the credit card processor receives the information from the cardholder’s issuing bank and a letter is sent to the business. The business has 10 days to respond and provide documentation that demonstrates proof of their position. If the business accepts the chargeback and sees that it is a valid dispute, the business does not have to respond at all. When the chargeback department gets the response documentation, it is shared with the issuing bank. Then, the issuing bank can take up to 45 days to review and decide. If the business wins the chargeback, if you received a temporary chargeback credit, it becomes permanent. If the business loses the chargeback, and the business receives a credit, it will be reversed. If a credit was not issued, the debit remains in place.
What can you do as a merchant to help prevent chargebacks? Businesses will never be able to eliminate chargebacks, however there are preventative actions you can take that go a long way toward keeping them to a minimum.
Have Clear Product & Service Descriptions
Naturally, we want to include great product descriptions to help sell customers on a product or service. However, it is important to be transparent about what your customer is purchasing. By having clear and transparent descriptions, you can go a long way toward reducing any confusion from the customer about what they are purchasing. Little steps like these can go a long way in preventing chargebacks and gives you the information necessary to combat a chargeback dispute.
A Robust, Easy-to-Understand Refund Policy
Establishing and maintaining a clear refund policy is important for any business. It is even more important to ensure this policy is easily accessible to customers. That means publishing it on your website and adding some of the details or instructions on where to view the policy on the paper and digital receipt. The more information the better, so be sure to include restocking fees, any exclusions, and how long customers can make a return and get a full refund.
Clear Billing Descriptors
To eliminate any confusion, ensure all product descriptions reference the product or service by name. This information should be clear and understandable on receipts. So, when a customer views their credit card statement, they can view your store name, the transaction date and the correct purchase amount. In addition, if your point-of-sale allows it, maintain as thorough records as possible to help in fighting back against any fraudulent chargebacks.
Post Company Contact Information Clearly
It is important to post your company information in a place that is easily accessible for customers. If customers are unable to contact you, they might simply open a chargeback out of frustration and it being difficult to contact your customer service team. Set clear times for when customers can reach your business and be sure to return messages and online inquiries in a timely manner to nip issues promptly.
Responsive Customer Service
Try avoiding customer service pitfalls like unanswered calls and emails. Not only is it frustrating to customers in trying to contact a business about an issue and receiving no response, but it provides further reason to the customer for potentially submitting a chargeback request.
Look Out for Suspicious Purchases
Credit card companies have protocols in place, like fraud alerts, that help protect both the consumer and the business. So, be aware of suspicious purchases and before processing the payment, investigate the charge and confirm that it is legitimate.
Understand Chargeback Regulations
Like any rule or regulation, it is important to keep up to date with how they impact you and your business. Chargeback guidelines are a set of instructions that it is important to keep apprised of. These guidelines are updated regularly, so businesses must monitor the regulations and then amend your policies and procedures to reflect those rules.
Discover Why You’re Having Chargebacks
Have a sudden influx of chargebacks? If your business’s chargeback rates increase, it is time to review your chargeback history and understand any trends. Maybe you identify that the chargebacks are due to instances of fraud. It might be time to invest in an EMV-capable payment solution.
Handle Legitimate Chargebacks Professionally
As a business owner, it is inevitable that you will encounter a customer that has a valid dispute on a fraudulent charge. It is simply the nature of modern commerce, so don’t take it personally. If the customer contacts you before filing a chargeback, do your best to correct the situation as soon as possible. This will go a long way towards helping your reputation as a business and might even make the customer decide to continue to do business with you. You might incur some shipping fees, or lost revenue, it’s far better than dealing with a chargeback dispute and the fee associated with it.
Maintain and Publish Clear Shipping Policy
Many customers expect rapid shipping times in today’s age of immediate gratification and thanks to Amazon Prime. When it comes to shipping abilities for a small or medium-size business, you need to reiterate to your customers the expected shipping times. Certain elements like supply chain obstacles, weather delays, and logistic partner delays are going to happen. Just be sure to post shipping policies on your website and provide links or a copy of them for each purchase.
More and more solutions are coming to the market that offer chargeback protection and management; however, until some of those solutions are more mainstream and available to businesses of all sizes, it is best to try to follow some simple best practices. These tips will go a long way in helping you mitigate the chance for a chargeback and equip you with the needed information to win a chargeback dispute.