Owning and running a business comes with so many challenges, and chargeback is one of them. Chargebacks are something most business owners are worried about when they sell products or services. When they get out of control, you will have to face a considerable business loss, and it can tarnish your company’s image among credit card processors. To run your business effectively and increase profit rate, companies need to take the best possible steps to ensure they have the minimal chargeback rate.
In this article, we will discuss what you can do to lower the rate of chargebacks within your business. But, before jumping directly to those tips, firstly, let’s discuss what a chargeback actually is.
What is a Chargeback?
A chargeback is a credit card payment reversal requested by an consumer and proceeded by the credit card company or bank. The process occurs when a customer contacts his/her credit card company or bank and requests the return of money he/she has spent on a particular purchase for some reason.
There are several reasons behind chargebacks, such as payment disputes, merchant errors, defective products, or other frauds. When the requested amount is returned to the customer’s account, the money is removed from the seller’s account, and he might lose his product, too.
Overall, chargebacks are introduced to ensure customer protection. But, they can be the dreaded headache for merchants. Though it is almost impossible to eliminate chargebacks, here are some tips that you may follow to reduce their rate to some extent.
5 Ways to Reduce Chargebacks
- Use a Recognizable Name
One major reason that customers request chargebacks is that they don’t recognize a transaction charge on their debit card statement or credit card statement. Such situations take place as buyers don’t know the business name. Consequently, they contact their credit card company or bank to request the money return. To prevent such chargebacks, you need to ensure that your credit card billing descriptor is similar to your company name. This way, the customer will know which merchant received the payment when the charge appears on their statement. This safeguard can discard potential chargebacks, help in handling chargebacks, or reduce the chargeback rate.
- Apply Fraud Filters
When it comes to avoiding criminal fraud chargebacks, the best way is to use fraud filters in the payment gateway. There are two standard security filters that merchants can use, including:
- AVS: Stands for Address Verification System; under AVS verification, a buyer must enter his billing address with the card details while processing a card-not-present transaction. The information given by the customers is then compared with the original registered bank documents. If it does not match, the merchant can choose to decline the transaction, and a notification will be sent to the cardholder about the same.
- CVC or CVV2: Card Verification Code, commonly called CVC, is straightforward than AVS. CVV2/CVC is a 3-digital code listed on the back of a debit card. This verification requires an individual to add this 3-digit number and other card details to process a translation. This code is then compared with the registered record. If the code doesn’t match (for any reason), the merchant will deny the card for safety purposes or to avoid fraudulent transactions.
You may implement both AVS verification and CVC verification in your transaction process to eliminate fraud. It will automatically lower the fraudulent chargebacks and transactions.
- Use Proper Product Descriptions
Customers may ask for stopping transactions due to missing or incorrect product descriptions. This happens when they don’t recognize a particular charge due to insufficient details about the product. In such cases, customers may contact their banks, and as a result, the bank will grant a chargeback. Being a seller, you can prevent such refunds by using detailed transaction receipts and statement descriptors. Also, your descriptions should describe the purchased item completely. The more details you add about your products, the better it would be for your business. It will lead your customers not to demand refunds – that means your money will remain in your account only.
- Be Available to Customers
Customer frustration because of poor customer service can also lead to chargebacks. When an individual questions you related to a certain charge on his credit/debit card account by your business, they expects a quick answer. If you put that customer on hold for a long period due to any reason, it may lead him to dispute the charge with the credit or debit card company. This whole process will lead you to lose your money as well as the product. To avoid such chargebacks, make sure your representatives are always there to sort out customers’ queries.
- Introduce Easy Refund Policies
Customers will occasionally have to contact their credit or debit card companies and banks to dispute a charge. It means they may request a chargeback if they find your refund policy complicated or lengthy. No matter the reason, if you do not have easy refund policies, the customers can take their complaints to their credit or debit card companies. As a result, the requested amount will be deducted from your account, and you may lose your product either.
Introducing easy refund policies will simplify it for customers to return your products and receive their money back. This way, the sale might not occur, but you will get your products back at least.
The information in this post shows that your business can lower the chargeback rate. By following the ways mentioned above, you can ensure that chargebacks are less likely to take place in your company. Though you cannot stop your customers from requesting chargebacks, these tips can help you eliminate instances where unnecessary chargebacks occur. However, you can lower the frequency of chargebacks by keeping your customers happy with their purchases and offering exclusive customer service.