Chargebacks: Everything You Need to Know

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Learn How to Prevent and Fight Back Against Chargebacks

Completing a credit card dispute has never been easier for the consumer. If you open your app and don’t recognize a charge, you can just lag suspicious transactions with the tap of a button, and two to three days later the money will be back in your account. This chargeback process is streamlined and simple for the cardholder, but for those of us on the other side of the terminal, these disputes can have a major impact on your bottom line.

Everything you need to know about Chargebacks - hero image illustration of merchant 'super hero' with shield preventing chargebacks

What Is A Chargeback?

Chargebacks occur when a transaction is disputed by the customer or the customer’s bank, and they ‘charge back’ that transaction. A customer could do this for a variety of reasons, but typically it’s either because they didn’t receive the services they paid for, or they believe a fraudulent charge has been run on their card. When a credit card chargeback is filed, the funds are held from the merchant’s account until the transaction is disputed.

It’s important for merchants to remember that chargeback notifications come by either fax or mail. They can be monitored in transaction management platforms like CardPointe, but having your mailing address and fax number up to date with your processor is an important step to make sure you’re proactively monitoring any disputes that can result in lost sales and a chargeback fee.

How To Prevent Chargebacks

Dealing with transaction disputes can be a hassle, so it’s important to learn how to avoid chargebacks. Implementing a few simple strategies can help you reduce the number of disputes you have to deal with.

Make sure as much information as possible is present at the time of the transaction.

This is a two-way street. It’s important for you as the merchant to gather as much information as possible from the customer. The more information you have, the easier it is for you to prove that the transaction was not fraudulent and was made by the customer. EMV and NFC technology encrypt the information in each transaction, making it harder to duplicate the information and run fraudulent transactions, and should always be the first choice for accepting electronic transactions at the terminal.

Providing an accurate description of the product or service the customer is paying for is the other side to this information exchange. Be as specific as possible when describing what you are selling, and even go as far as having the customer confirm that they’ve read the description and know what they are ordering. Misunderstandings can often lead to a chargeback, that can be prevented by simply providing more information upfront.

Be clear on the customer’s statement.

A customer will often file a chargeback if they don’t recognize the charge on their billing statement. Make sure that your descriptor is clear and concise, so the customer knows exactly what the charge was for when they check their statement.

Provide prompt customer service for refunds and returns.

If a customer contacts you regarding a refund, make sure you provide a quick response. The customer could be on the verge of filing a chargeback, but still wanting to check with you first before taking action. Having that conversation before the chargeback is filed can not only improve the customer’s experience, but most importantly save your business precious time and money.

Use a plugin or software to monitor duplicate charges.

Many processors offer a software to monitor incoming chargebacks. You want to take advantage of any and every resource you have to monitor instances where a customer is disputing a credit card charge, and then respond promptly.

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How To Handle Chargebacks Once They Arise

It’s important to remember that preventing chargebacks is the best way to reduce damages done by disputes. Once a charge from your business has been disputed, it’s much harder for you as the merchant to win the case than it is for the customer that filed it. This is especially true for card-not-present merchants, which is why it’s important to get as much billing information as possible for online and over-the-phone orders to make sure you don’t lose sales due to chargeback fraud.

Responding quickly and with as much information as possible are two keys to winning any potential disputes. Your processor can put you in contact with their chargeback department, where you can get the necessary information to try and win your case. If you go into the dispute with the necessary billing information, you’ll have a better chance of having the case resolved in your favor and avoiding a payment reversal.

Chargebacks can be a hurdle for businesses accepting credit card transactions. So it’s important for merchants to put themselves in the consumer’s shoes, and implement every strategy possible to prevent their customers from filing chargebacks.

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