Chargeback disputes are part of doing business.
There are ways to reduce and even eliminate chargebacks at your business by following these simple best practices, recommendations.
We’ll cover the first 17 things (on a list of 31) you can do to proactively reduce the possibility of chargebacks at your business and in some cases potentially eliminate them!
Here’s a quick review from previous articles and videos on chargebacks:
#1. A chargeback is a dispute or disagreement between the cardholder and the business and it’s NOT the same as a refund.
#2. There are financial penalties to the business owner every time a chargeback is issued and there are progressive penalties for repeat offenses.
The progressive penalties could lead to your account being shut down.
#3. There are 3 types of chargebacks: (1) Outright Fraud (2) Chargeback Fraud (3) Friendly Fraud
Within those categories, there are over 100 different individual chargeback reason codes between the four major card brands, Visa, Mastercard, Discover and American Express.
#4. Fighting chargebacks costs time and valuable resources and it makes sense to hire a chargeback management company to handle the task for you.
The prevention methods on this list, pertain largely to the Friendly Fraud chargeback category which are chargebacks initiated due to common and honest human errors like forgetfulness or being unclear of what they ordered and purchased.
Friendly Fraud deals largely with reasons related to miscommunication or misinformation on either or both parties, and because of that, there are things you can do as a company to prevent them from happening.
Remember that a merchant account is simply a dedicated bank account and you can get shut down and even blacklisted if you abuse the account, so it’s best to stay on top of it and make sure you’re following the rules.
You can download the free PDF that shows all 31 ways and in the video I cover some things that may not be covered in the checklist.
Here’s (the first) 17 best practices to reduce and eliminate chargebacks.
#1. Use a clear payment descriptor.
The payment descriptor is the label that the customer sees next to the purchase on their credit card bill or online statement transaction history.
This pulls from the website gateway or the DBA on file if you have on your merchant account. So the best practice is to use a company name that the customer will recognize so there’s no confusion as to where the charge is coming from.
#2. Post your refund and exchange policies.
Inform your customer up front and in advance of your refund policies so nothing is left to chance.
Post them in your storefront, on your website, in your contracts and in the emails you send out.
When major retailers have “no questions asked” return policies, even for opened or used products, a lot of time consumers assume that every business they go to is going to have that same policy.
#3. Add Terms and Conditions on the order form and payment page.
If you don’t have a payment page service that can do this for you, check the link in the description for more details.
#4. Mail and email a copy of the sales receipt.
Both of those things are great excuses to gather that information from your customer.
A mailed copy of the receipt is fitting to a phone order or mail order environment and with order form and payment page building software, you should easily be able to set your system to email a copy of the receipt immediatley to your customer.
#5. Send billing reminders and receipts for billing plans.
Most recurring billing systems will have the option to mail a receipt as a card is charged and some even have reminders that can go out before the charge is made.
The cardholder can anticipate the charge when this happens ensuring that they are in acceptance of the charge.
#6. Put your descriptor and links about the purchase on the “thank you” page.
After the customer clicks submit to buy for an online purchase, the confirmation page can and should give a reminder about billing procedure including how the card is charged and what the descriptor will say.
#7. Deliver products quickly – don’t hold customers money.
If possible, charge for services and products at the time of DELIVERY.
If you need to charge in advance, make sure to execute on work orders and deliver products and services as quickly as possible.
The less time a customer has to wait for something that they already paid for the better.
#8. Be quick and responsive to customer inquires and complaints.
Don’t delay a response to a customer.
A lot of chargebacks will come because the customer doesn’t hear back from you soon enough and so they draw their own conclusions.
#9. Record the phone calls.
If you record calls, be sure to let the customer know about this procedure.
Recording calls can be used as a measure to remind employees and customers to hold them accountable and you can go back and review calls for purchase history accuracy.
#10. Audit your batch totals for errors in dollar amounts.
Check daily totals to make sure they’re in line with your typical sales.
I’ve seen instances where an employee added an extra “0” to a purchase, that turned out to be a $100 order instead of a $1,000 order.
Make sure you have a way to catch errors like this.
#11. Get it in writing with a purchase order or have your customer sign a credit card on file form.
If you use this option, be sure to instruct your customer not to fill out their entire credit card number on a traditional credit card authorization form.
hey are not the safest way to submit credit card details.
Instead, use credit card on file forms.
#12. Be very clear about your terms of service and your refund policy.
Let your customers know what you are offering and what you are charging.
Let them know whether there will be hidden fees or continuity associated with your product or service.
Will you be charging annual fees, or monthly membership charges?
Does your service automatically renew?
Make sure the customer understands everything they are buying and everything that it is going to take to complete the use of your product or service
#13. Gather as much information as possible about the customer.
In a card-not-present environment, my recommendation is to gather name, email, phone number and address.
The more information the cardholder gives you, the more protection you are arming yourself with for a future chargeback should it happen.
#14. Make sure the customer knows your customer service protocol.
Make sure they know how to get ahold of you by phone and email.
Send them emails, and make sure your phone number is clearly posted on your website and marketing materials.
#15. Use the AVS and CVV system at the point of sale.
Address verification service (i.e. “AVS”) comes with every payment gateway and retail device and is an option that can simply be turned on by request.
It’s not only the 3 digit code on the back of the card, but it can also include the street address, and billing zip code to be entered at the time of sale.
Gathering this extra information helps ensure that the purchase is legitimate.
#16. Eliminate the late fees, interest charges and penalties that customers are likely to object to.
If a late fee get added to a charge it increases the likelihood of a transaction being disputed.
So you make choose to ask yourself if the $10 late fee on a $100 dollar transaction is really worth trying to collect.
It may not be.
#17. Use a fraud detection and chargeback monitoring service like Chargebacks911.com
It’s a managed for you service that helps you reduce potential fraudulent transactions and in some cases can even entirely eliminate chargebacks from happening.
The cost of an average chargeback fee is $40 (between the chargeback fee and the retrieval fee) and chargeback management companies have programs that will catch chargebacks before they get reported to your merchant account provider, thus saving you the $40 per occurrence fee.
IF your business is suffering from chargebacks, click here to learn more about how to fight chargebacks with a management service!