One of the most frustrating things while running a business is dealing with chargebacks. Initially, chargebacks got formulated as a way of protecting buyers from being exploited. However, nowadays chargebacks have changed to become a threat to many sellers. As a business owner, chargebacks can be hurting to your business and cost you much money, effort and consume most of your time.
High chargeback rates will further result in being classified as a high-risk merchant. It can also result in your merchant account to be frozen or be completely closed. Considering this, you need to have a plan on how to prevent the occurrence of chargebacks in your business and keep your income. In this article, therefore, we discuss what the causes of chargebacks are and how you can prevent their occurrence in your business.
Understanding Chargebacks and their Causes
Transfer of money back to the buyer’s account is what we refer to as chargebacks. Chargebacks can be as a result of many reasons. They can be as a result of clerical and technical errors, customer dissatisfaction, and even as a result of fraud detection. The bank will always give back a reason code to the business explaining why the buyer disputed the transaction. Reason codes are usually taken on the basis that the customer is explaining the truth. This means that it is unto merchant to fight chargebacks in his or her business.
Chargebacks are very costly and disturbing hence preventing your business from running smoothly. If you are experiencing difficulties with chargebacks in your business, consider employing the following seven tips;
1. Understand all causes of chargebacks
As already discussed, there are different classes of reasons why a customer may dispute a transaction. However, you need to understand all these reasons so that you can prevent them from happening. Minimizing reasons for the customer to dispute any of your transactions will keep your business safe and out of chargebacks risks.
2. Open Communication with Your Customers
By practicing proper communication with your customers, it is possible to avoid the occurrence of chargebacks in your business. Try to encourage your customers to communicate about the disputes they have with any of your transactions openly.
This works best for eCommerce merchants that never get to see their customers. It helps to solve disputes before the customer gets in contact with the bank requesting for a chargeback.
3. Your payment descriptor should be clear
The appearance of your business name and contacts on the customer’s credit card payment statement is what we call a payment descriptor. Be sure to use a recognizable company brand to lower the risk of chargebacks. For information about the looking of your payment descriptor, you can contact your merchant account service center. They will give you all the details about your account and how the descriptor should look like.
4. Proper Product and Service Description
One way to help reduce chargebacks is by describing what you sell clearly. Consider also not to over exaggerate about your products. This makes sure that your customer’s expectations are not more than what you can deliver. As a result, you lower the risk of customer dissatisfaction and hence chances of chargebacks.
This is more emphasized for eCommerce sellers as the customer depends on the description of your products online.
5. Using a Payment Processor that Features Fraud and Seller Protection Traits
A good payment processor should have fraud and seller protection features. Fraud protection characteristics will include observing that which does not comply with AVS and CID standards of verification.
For seller protection traits, they should cover a certain amount of chargebacks losses in all eligible transactions. Some of the payment processors that offer seller protection terms include PayPal and Square
6. Clear Product Return Policies
I understand not many of business owners love to process a return. However, having a clear return process is less expensive and less hurting to your business as chargebacks are. Also, formulating a return process lowers the risk of the customers pursuing chargebacks claims.
7. Use chargebacks prevention services to verify sales
You also need to confirm the expiration date of the customer’s credit card and keep details of every transaction.
Chargebacks can get you out of business if not properly taken care of. As seen, there are different causes of chargebacks in a business. Consider understanding them all and apply the above tips towards preventing chargeback occurrences. By doing this, you are lowering the risk of chargebacks happening in your business.