Easy Ways to Reduce Chargebacks

Easy Ways to Reduce Chargebacks

Chargebacks are something that every business wants to avoid. Financial organizations often have complex and complicated disputation processions, which may involve fees. However, occasionally there are legitimate reasons why the customer would refuse to accept responsibility for the charge. For example, if the customer receives a damaged product or is the victim of fraud. Technical problems during the payment process, such as duplicate processing, can also cause chargebacks. Below are easy ways to reduce chargebacks and ensure smooth credit card processing transactions.

Preventative Tips

Always use a name or billing descriptor that the customer will recognize. One of the leading causes of chargeback is confused customers failing to recognize the charge name. Avoid using your personal name and ensure that your business name and receipt information match. For e-commerce websites, considering using the URL as the description. Always include contact information, such as a phone number or email address, on the receipt. This will encourage doubting customers to verify their purchase. Any chargebacks will come with a retrieval request, which usually requires a copy of the receipt. Promptly respond to all retrieval requests with legible documentation.

Payment

Always obtain an authorization for the specific amount purchased. Never approve multiple authorizations for a full sale amount on different cards. Instead, decline the transaction and ask for another form of payment. If the card does not successfully swipe, then you will have to key in a manual transaction. Be sure to imprint the card on the receipt with the CVD code and 3 digit authorization code showing. Always compare the customer’s card signature to the one on the back of the card. If there is no signature, ask them to sign it. If they refuse, ask for another form of payment. For e-commerce transactions, merchant accounts can utilize the Address Verification System (AVS). This will ensure that the order form address and the cardholder’s billing address are identical. Criminals using a stolen card will never use the real cardholder’s billing address. As a result, this will lower your processing fees.

Refund Policy

Offering refunds are the easiest way to reduce credit card chargebacks and improve customer service at the same time. Always ensure that the return policy is printed on the receipt, which is signed by the customer at the time of purchase. Keep in mind that most providers of merchant accounts expect the return policy to be printed close to the area that the customer signs.

Credit card processing is an essential business transaction that can be improved through preventative techniques, ensuring an accurate payment process and having a refund policy.

How to Reduce Credit Card Chargebacks

Credit card processing is one of the chief concerns of those merchants who are looking to consistently beat the competition. While many merchants are looking for ways to reduce their processing costs, there are others who manage merchant accounts who are looking to reduce their risks. Whenever a company decides to accept credit cards, that company inevitably must worry about chargebacks. A chargeback is when a customer purchases something from the merchant with a credit card, then attempts to cancel the charge through his credit card company. If the customer is successful, merchants can lose out on significant revenue, taking a major loss on what would have been an important sale. There are a few strategies that can help those in charge of merchant accounts with this difficult reality in credit card processing.

Signature on delivery protocols

Your business will find that one of the most common reasons given in chargebacks is that a customer did not receive the item he or she paid for. Typically, when a business ships an item, the delivery service will simply leave that item at the customer’s door. What happens, then, when someone steals the item? By requiring a signature on delivery, your business can ensure that the customer actually gets the item that was sent their way. This is an important safeguard which can shut down some of the fraud right in the beginning.

Clearly defined “Terms and Conditions”

Often, chargeback disputes will occur because customers will claim that there was some sort of deficiency in the product. However, this can be a challenge for merchants because of the nature of selling goods. What happens when a short, for instance, rips two weeks after a person has purchased it? If your store has policies on returns and things of that nature, then you must outline them in a clearly defined section. From there, you should make your customers agree to your terms and conditions as a precursor to their purchase. This way, if they attempt to file a dispute with their credit card company, you will be able to point that company to the fact that the customer clearly agreed to your terms before buying the item.

In addition to these steps, it is important to take precautions on who you sell to. If you notice repeated fraudulent activity from a consumer, then you can safely choose not to deal with them. Risk management is not a science, but by using some common sense, merchants can save out on potentially large losses.

How Accounting Changes When You Start Accepting Credit Cards

Despite what some people might believe, accepting credit cards for a business requires a couple things before the individual can get one. For example, business owners will need to register a credit card account, also referred to as merchant accounts, at a financial institution to accept credit cards. People who have established a long-term relationship with their financial professional should have no issues creating an account.

The Basics of Merchant Accounts

Before actively hunting for a merchant account, an individual should familiarize themselves with the basics of merchant accounts. First, business owners must show proper documentation. Banks want an ample supply of financial information about the individual and their business. However, what people need to provide varies from institution to institution. Those who operate high-risk businesses may have less options.

Once the documentation has been prepared, people will need to look for lower rates. Banks and credit card companies usually charge 2.5 percent to 5.5 percent of their credit card sales. This, however, depends on the two factors: Sales volume and average size of sales. Those with a higher sales volume and larger average size of sales will pay a lower percentage. Nonetheless, keep in mind that each bank charges different, so check with multiple financial institutions.

Credit Card Chargebacks

Credit card processing sometimes leads to chargebacks, and a chargeback occurs when a customer disputes charges made to his or her credit card. Entrepreneurs with too many chargebacks can lose their merchant account. Additionally, few financial institutions will jump at the chance to provide a merchant account to a business who lost it.

People can receive chargebacks through no fault of their own. However, individuals want to reduce the frequency of procedural chargebacks. To do this, consider the following:

  • Take the Credit Card from the Customer
  • Examine the Expiration Date
  • Swipe It Through the Electronic Terminal
  • Ensure the Signature on the Receipt Matches the Signature on the Credit Card

Only the person with the name and signature that appears on the card has the authority to use it. However, some business owners accept credit cards that name the owner’s spouse. Another element to avoid is factoring. This is the process of running the charges of another business through an individual’s merchant account. In some cases, factoring is illegal, but additionally, all it takes is a single customer to initiate a chargeback to get caught. This leads to the loss of a merchant account forever.

How to Dispute a Chargeback Initiated By A Customer

Having the ability to conduct credit card processing is definitely a positive element. However, sometimes merchant accounts can have their downsides. One situation that will come along no matter how amazing your products are is customer chargebacks. Customer chargebacks can hurt your business because the money is returned to the customer, and you may not be able to recover your product. Aside from that, the merchant account company may charge a fee for the chargeback that was out of your control. Luckily, you do have some recourse if this happens to you. You can fight a customer chargeback and possibly have it removed if you remember to always take the following steps:

Verify the Customer’s Identification

You will want to always ask for identification from anyone who is using a debit or credit card to pay for your goods or services. If the name on the credit card does not match the name on the identification, then you have every right to refuse the transaction. Processing a shady transaction may come back to haunt you in the form of a chargeback in the future.

Keep Records of Everything

You must keep records of every one of your transactions so that you will have the ammunition to fight an unjust chargeback. If you can set up surveillance cameras in your store, then they will help you to record not only the customers but also their method of payment. Additionally, a camera could take a picture of a person who is signing the receipt for a credit card purchase.

You must always ask a customer to sign the receipt whenever he or she uses a credit card to make a purchase. You can use that information when it comes time for you to fight a chargeback.

How to Fight a Chargeback

The proper way to dispute a chargeback is to contact the credit card company so that you can give the statement of what happened and prove the credit card processing incident. You will need to fax the credit card company all the information that you have that proves your customer legally made the purchase. If you can prove the validity of the transaction, then you may receive the funds that you lost back into your merchant accounts. After you win a chargeback case with a customer, that person will be less likely to try to issue a false chargeback in the future.

Understanding What Happens During a Chargeback

Credit cards are being used more frequently than any other time before. Most brick-and-mortar businesses would financially suffer if they did not accept electronic payments. Many consumers do not carry cash and only pay for their purchases with plastic. For e-commerce businesses, having a merchant account is a definite must. To accept electronic payments, it is very important for all companies to have credit card processing equipment. Once this is done, business merchant accounts can then be created.

All companies with business merchant accounts will eventually have a customer file a chargeback complaint against them. They do this because they don’t agree with a transaction that has occurred with their bank. By doing this, they are requesting that their money be returned back to their bank or credit card.

It’s very important for a merchant to understand what exactly happens when a customer files a chargeback against them. As soon as the complaint is made, the funds are debited from the merchant’s bank account and usually placed in what is called an escrow account. The funds will remain there until the dispute is settled and a resolution has occurred.

The merchant will be notified of the chargeback and can accept the chargeback or dispute it by providing documentation that proves that the transaction was valid. If the merchant ignores the chargeback, or the documentation provided does not provide valid proof, the money is returned to the consumer, and the merchant is charged a fee. If the merchant is successful in defending the chargeback, the funds will be returned to their bank account. This is a good thing for the merchant, but it does not necessarily mean that the merchant will not have to pay any fees. For this reason, merchants never want to be notified of any chargebacks against them.

From a consumer point of view, having the right to file a chargeback is terrific. It protects them when they feel that they have been a victim of fraud, received an item that is not as described or received a damaged item. There are some customers that will try to abuse the chargeback system. Those who do this too often will many times be blacklisted by merchants. Con artists like this should never discourage a company from setting up their credit card processing equipment. They make up a very small percentage of customers, and their schemes are usually short lived.

How Does a Chargeback Get Reported?

Chargebacks are the little nasties of business that owners love to hate. The reason for such disdain is that a fair percentage of them are not legitimate. Businesses conduct credit card processing to increase the possibility of more sales. However, with an increase in sales comes an increase in chargebacks. Legitimate customers place chargebacks on their credit cards when they do not receive items that are in good condition. Some of them may also perform a chargeback when an identity thief victimizes them. However, some customers use chargebacks as a means to get products from the merchant without having to make payment.

How Does a Chargeback get Reported?

The chargeback process with credit card processing starts with a customer complaint. The consumer calls the credit card company, tells the customer service representative the problem, and prompts the beginning of an investigation. The credit card company then launches an investigation to gauge the validity of the claim. If the credit card company sides with the customer, it will make a motion to withdraw the funds from the merchant accounts. A business that has a well-established card processing system and a merchant account can be notified of such chargebacks.

Certain merchant accounts have attached features that will allow the account holder access to online management that includes information about chargebacks. Additionally, the person can request that the merchant account provider send a fax in chargeback situations. When trying to run a business, keeping track of occurrences such as chargebacks are important for smooth operations.

Using Chargeback Information to Prevent Chargebacks

To save money in the future, a merchant can deny services to anyone who has placed an illegitimate chargeback. The owner of the business has the right to review chargeback reports and ban customers who try to abuse the system repeatedly.

Another way a company can avoid chargebacks is by using a strict verification system physically and online. If a person walks into the store and wants to use a credit card, the cashier or clerk should verify that person’s identity immediately and make sure the name on the card matches the name on the identification. The individual should also check the expiration dates and security codes.

The right credit card processing software can verify online purchases thoroughly. Such programs can electronically check a person’s credit card and search for the available funds and a name match to legitimize the purchases. This protects merchants from taking repetitive chargeback hits.

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