How Can You Prevent Chargebacks In Your Business?
Posted On: 06/07/21 - 0

What Can You Do To Prevent Chargebacks In Your Business?

What is a chargeback? In simple terms, it’s the reversal of a card payment that comes directly from the bank because of a consumer dispute. The chargeback process is designed to keep customers feeling secure. Chargebacks help to increase consumer confidence; however, it can often be a costly hassle for the seller. As an entrepreneur, how can you prevent chargebacks in your business?

Sellers often experience the burden to show that the customer in this case is not correct. If the consumer successfully disputes charges, you will lose both the product and the revenue from that sale. Even if the dispute is unsuccessful, the acquiring bank will withhold payment for any chargebacks until the matter is resolved. In addition to the added fees charged by the banks and processors, disputes can be expensive. We at Padgett Business Services N.W. have provided some ways to prevent chargebacks in your business whenever possible.

Understand Why Chargebacks Occur

It is important to investigate and find out the actual reason for the chargeback. Sometimes actual fraud can happen because the card was lost or stolen and used to make some un- authorized purchases. Here are some reasons customers dispute credit card charges:

  • The customer doesn’t recognize the store or recall the purchase made by them.
  • The customer felt that they were incorrectly billed. Things like sales price, unexpected shipping fees, added service charges, or automated billing can trigger the customer.
  • The customer didn’t receive the item ordered.
  • The customer felt the item was not as described, is defective, or a misrepresented service.

Use an Accurate Billing Descriptor

Your billing descriptor should include your actual store name and a working phone. Businesses that use a different name than their actual store name in their payment descriptors are prone to chargebacks.

Employ Best Practices for the Operation

Understand the information that is required by you to verify the credit card purchases and incorporate these practices into your daily routine. A few precautions such as:

For card-present (CP) operations in retail stores and sales should use a mobile card reader. Ask for an ID and make sure the card name and the signature is a match. It can reduce your exposure to chargebacks due to stolen card.

For card-not-present (CNP) operations like online stores should ensure a secure e-commerce platform and enable address verification (AVS). Also require the shoppers to provide their card ID (CID), which is the 3-digit number on the back cards or the 4-digit number on the front of the American Express cards. Use a reputable payment processor for fraud detection and seller protection features.

Respond to Customer Issues and Complaints

Make it a policy to respond to the problems of the potential chargeback customer via phone or email as soon as possible. Have a clear return policy and process refunds for returns promptly. If you receive chargeback notification from the customer, research the purchase made and contact the customer. Post a clear return policy in-store, on websites and receipts. Record pertinent information for every sale.

Be Selective When Fighting Chargebacks

The positive point for the seller about chargebacks is that you can fight the dispute. But not every chargeback is worth fighting for. You can simply refund the customer and not fight for the dispute as one of the wise alternatives if possible.

The best option is to prevent chargebacks in your business as they are challenging, preventable, and manageable. Overall, we want you to be as prepared as possible to manage chargebacks and prevent it from happening. Consider hiring accountants to handle your chargeback accounts to help you track the expenses. A high number of chargebacks can be a major risk for your business. Hire us as your accountant to help you navigate through this any all of your small business needs. We are Located in Edmonton and all we are ready to serve you!

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Edmonton, Alberta.
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780.482.7297