Top 8 Ways to Prevent and Manage Charges

What is a chargeback?

A chargeback is the result of a charge dispute by the credit card holder. If the card-issuing bank disputes, it will immediately return the charge to the cardholder, then file the chargeback through the e-voting system, which will then withdraw the chargeback from your checking account and send you a chargeback notification. You will then need 3-4 weeks to dispute the chargeback by providing these sales documents.

Online merchants are at greater risk of an unsuccessful chargeback dispute given the lack of a signed receipt that provides proof of sale. There are both valid (such as duplicate transactions and damaged items) and invalid (fraudulent) reasons for a chargeback. Merchants should take steps to prevent and minimize chargebacks, regardless of whether the dispute is valid.

Top 8 Strategies for Managing Chargeback Risk

As mentioned previously, there are various reasons a customer may dispute a payment. How the retailer manages the risk associated with such disputes will determine whether it results in a chargeback.

Here are 8 common risk reduction scenarios and approaches.

01. Customer Compensation —

When a customer requests and is eligible for a refund, be sure to do so quickly to avoid a “raw charge” chargeback. Furthermore, make sure your refund policy is clearly stated on every trade and the customer should be asked to click the “I agree” button before finalizing the order. Refunds only to the same credit card used for the original purchase.

02. Implement diagnostic controls for fraudulent charges.

Since the card is absent during the transaction, online transactions have a higher risk of fraud. Here are some ways to reduce this threat:

• Request the security code on the back of the credit card to process the payment.
• Keep a record of problem customers and block transactions from those customers.
• Limit the number of transactions by the same customer for a specific time period (eg hour, day, week).
• Keep up the good posts.
• Track customer communications and document customer IP addresses.
• Use an address verification service. This will match the cardholder’s address to the card before the purchase is approved.

03.Customer service –

When a customer can’t find your information, when there’s a question or criticism, they can go directly to their credit card company to dispute the charge, rather than contacting you first. Make your customer support contact information easy to find.

Make it visible on your website, include it using delivered products, and put it in all mailings. Respond quickly to your customers. This can encourage a customer to call you with a dispute before going to their payment card business, give you a chance to fix the problem, and can also build a good reputation for customer service.

04.Recurring Transactions —

Recurring transactions are typically used for subscriptions and are often automatic. As soon as a customer unsubscribes, take immediate action to stop automatic billing. This will avoid multiple postbacks from the same customer.

05.Product not received –

Payment cannot be processed until the goods or services are delivered. Using a shipping service that offers delivery confirmation will provide proof of delivery. Here are ways to manage delivery scenarios that are not so simple:

06.Installment payment —

Be sure to disclose all payment terms when drafting and have the customer accept those terms by using the “I Agree” button. The first installment payment cannot be processed until the goods have been shipped.

07.Fast delivery –

Payment may be processed prior to shipment when the sale is termed “delayed shipment” in the terms, however, you may not process a deposit prior to shipment. Again, have the customer click the “I agree” button.

3 Best Strategies to Respond to Charges

When a chargeback occurs for any reason, follow the steps below to have a better chance of successfully disputing the chargeback:

01.Respond to a dispute as soon as you receive a notification. If you don’t respond within the required time frame, you’re going to forfeit the wholesale plus any chargeback penalties.

02.Gather all the paperwork related to the sale and give it to the credit card business. Including order confirmations, shipping notifications, customer IP address and certain customer correspondence.

03.Learn from each chargeback situation and respond by setting up systems to protect against similar incidents.

Our experienced team has a wealth of experience helping merchants better understand and reduce chargebacks. Contact us today with questions about this topic or to set up a merchant account.