If you run a small business you likely accept credit cards as payments. Credit cards are fast, easy and probably the most common method of payment by far. However there can be issues, i.e. when a customer disputes a credit card charge and the banks issue chargebacks. In this case, the bank reverses the payment to the merchant. While there could be instances that this is valid – if you were overcharged, if you were fraudulently charged or if the services/product were not delivered. But, dishonest people sometimes do take advantage of this and merchants pay the price. While some chargebacks are legitimate, not all are. Fraudulent chargebacks lead to a loss of revenue for the merchant and can harm the company’s reputation. What can merchants do to take a stand against chargebacks?

Reasons for Chargebacks

A consumer may initiate a chargeback for several reasons. For instance, they may not receive an item and request a refund. At times, there is a clerical error, and they have been billed multiple times or overcharged for something they bought. Unrecognized charges often lead to chargebacks, and a person may receive a product that’s different from what they ordered.

However, many chargebacks are fraudulent. For example, some people make a purchase and then dispute the charge to get the item for free. At other times, a person is a victim of identity theft and someone else purchased an item and charged it to their card. Over 2% of all transactions lead to a chargeback, and businesses lose millions of dollars each year as a result. How can a merchant reduce the risk of chargebacks? BlueSnap can help.

Monitor Chargebacks

Many companies fail to see chargebacks or address them in a timely manner. While some chargebacks are legitimate and need to stand, companies must worry about those that are fraudulent. One way to reduce these fraudulent charges is to fight them when they occur. People will quickly learn which merchants fight fraudulent chargebacks and which do not. They then focus their efforts on companies that don’t monitor the reversal of charges, knowing there will be less pushback or none at all. Keep good records and don’t be afraid to share the facts with the payment processor/bank.

Improve Customer Service

Customers become frustrated if they don’t receive an item they ordered when expected or when the wrong item arrives. Their first step is often to contact the merchant to discuss the problem. They don’t contact the bank to request a chargeback if the merchant handles the issue satisfactorily. If a merchant knows an order will be delayed for any reason, they should reach out to the customer first. Consumers are very understanding when it comes to delays that are not the fault of the merchant. They recognize the merchant cannot control where a product ends up once it leaves their hands.

Subscription Services

Subscription services continue to increase in popularity. However, when a person wants to cancel a subscription service, they may find it difficult to do so. This could lead to chargebacks. These chargebacks can easily be avoided. Include a subscription cancellation policy on the website where subscribers can easily find it. If a customer requests that their subscription be canceled, cancel it immediately. Follow up with a confirmation of the cancelation. In addition, remind customers each month prior to charging the payment method. This ensures they know what the charge is for and will be less inclined to dispute it.

Summary

Every business will have an occasional chargeback. However, this reversal of charges does not need to become commonplace. Merchants can fight back by taking the above-mentioned steps. When a financial institution sees that a merchant is trying to keep chargebacks to a minimum, it is more inclined to hold off on reversing the charges until an investigation can be done. This benefits the merchant, so implement these steps today.

Disclosure: Some links will earn me a commission