How to Protect Your Business and Win at Chargebacks

Chargebacks can have big financial consequences for merchants. In fact, penalties and fees are often charged by banks and card companies in order to persuade merchants to limit their chargeback frequency. And while a merchant who has a chargeback rate of greater than 1% of transactions can seem risky to banks, chargebacks are simply a reality for most merchants.

First, what are chargebacks? Simply put, they are disputed transactions. They fall under different categories, which we explain in this article, but chargebacks are generally instigated by the consumer.

Chargebacks are meant to offer protection to consumers from unauthorized transactions. Instead of forcing a discussion between the consumer and the merchant, consumers can simply begin the chargeback process with their bank. While these protections may be good for the consumer, it’s very difficult for chargebacks to be decided in favor of the merchant. In fact, according to Wikipedia, only 21% of these claims are decided favorably for merchants. The unfortunate truth? Chargeback claims are hard to win. Here’s how to increase the likelihood that you can win a chargeback.

Document everything

As we said in this previous post, keeping documentation of each transaction offers you tangible evidence to support the legitimacy of a charge. Chargebacks are time-sensitive, so keeping your records up-to-date and accessible are important. Using a cloud-based, real-time reporting tool (like the one that comes with every Forte account) is an easy, simple way to keep organized.

Use a recognizable name

Customers who are confused by how line items appear on their transaction history are more likely to instigate a chargeback for fear that their account has been compromised. However, by using an easily recognizable name, you can reduce confusion and limit chargebacks. Consider adding an email address or phone number to the way the charge appears on the customer’s statement. For example, instead of just listing “Jay’s Custom Banners, LLC” consider listing “Jay’s Custom Banners 504.123.4567” in the line item.

Offer good customer service

Open and honest dialogue with your customers about services and offers can reduce the need for chargebacks. In line with the suggestion to document everything, service contracts and a clearly-stated return policy can reduce miscommunication and foster lasting, positive relationships between you and your customers. Address customer complaints and resolve disputes before a customer decides to instigate a chargeback.

Dispute the chargeback

Because chargebacks are difficult to win for the merchant, many simply don’t respond to claims. According to the 2014 Cybersource Fraud Benchmark Report, only 60% of merchants respond to chargebacks. However, of those disputed claims, about 41% of merchants successfully win claims by re-presenting their evidence. Submitting signed receipts, responding to processor inquiries and offering clear, responsive customer service significantly helps increase the likelihood of winning the chargeback.

Chargebacks, while helpful to consumers to protect them in the marketplace, can pose a significant financial threat to all businesses. However, while difficult, it is possible to win a chargeback through clear communication, proper documentation and proactive customer service.

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