Easy Ways to Reduce ChargeBacks
The use of credit cards for purchases is increasing by leaps and bounds. The Globalization of the world business economy is the driving force behind the resurgence of plastic money. More businesses are inclined to accept credit cards in order to serve a range of buyers from across the world. However, with a lot of good things happening on the payment-processing front, there is also a darker side to it.
Merchants are increasingly concerned about "Chargebacks" - and they're significantly increasing at an alarming rate. Merchants have for long considered that Chargebacks are serious business. A chargeback is when a customer calls their credit card company by telling them one of the following:-
They don t recognize the transaction (it s assumed to be fraudulent)
They are extremely disappointed with the product or service the product promise was either unfulfilled or deceiving
The services/product was never delivered by the merchant
In other words, a Chargeback is when a transaction of the sale is completely reversed by the company that issued the credit card itself (such as Visa ). This is bad news for the merchant as they not only lose a sale but also are charged an amount for the reversal of sales and services.
Among the other reasons for chargebacks are credit card expiration, double charging, and bank errors (Transaction gateway/server problem). Chargebacks cannot be completely eliminated, but merchants can take some preventive measures to keep them in control. With an increasing number of transactions, chargebacks can come back to haunt the merchants severely.
If a merchant keeps getting repeated chargebacks, then there is a possibility that he/she will lose the merchant account. Most credit card companies will take a notice of increased chargebacks and could (most likely) put the merchant on their blacklist. The major credit card companies have access to a match list that will have the merchant s name written all over it! This means that the merchant will not be able to accept credit cards through a merchant account. It will take several years before a credit card company will re-issue a merchant account taking in account the bad history of excessive chargebacks.
But, so much for the darker side of chargebacks, let's discover 5 easy ways to reduce chargebacks in the long run...
Five Suggestions for Reducing Chargebacks
1) Let your clients know what they ll see on their credit card statement why, and how much. This is one of the most effective ways of reducing the fraudulent transaction assumption by a customer. The customer will be accurately informed about his particular purchase through the credit card. On many occasions, a customer will not see the actual name of the product merchant and instead, they will see a 3rd party processor name on the statement of their billing.
2) If your business deals with a lot of International customers (such as an eBay store or a website that sells direct to several countries) then keep a close eye on purchase orders coming from developing countries. A large percentage of fraudulent purchases are made in developing countries. You must try to scrutinize the purchase to the best of your experience and knowledge.
3) If your business involves shipping items to a customer then it is absolutely vital that you collect signatures on the delivery. This simple step will turn out to be your biggest proof in case of any discrepancies. Retain a copy of the signature as proof of delivering the item to the customer.
4) If you are not sure about the legitimacy of an order do not hesitate to call the card company or the issuing bank before processing the order. This step will verify if the order is registered to the actual customer profile, they have on file. In case of a suspicious large volume order, it becomes a rule of thumb to check out the profile of the customer before processing an order.
5) If you run into a "problem customer", then perhaps a refund or an exchange will be the safest and most profitable course of action over the long term. Problem customers are rare, but when they do arrive, they arrive with a splash - and it can take a toll on your schedule, and potentially your business. These are people that you usually can't please (regardless of the quality you provide or your level of service), they're volatile, they're quick to threaten, and - depending on their mood - they may take action against you based on what they may perceive as a severe problem with you, your business or your product/service.
Take the high road and "let them win" by either offering a refund or an exchange of some kind - do whatever it takes to diffuse the situation. This initial "loss" will more than makeup for the nightmare of dealing with a volatile customer bent on trying to sabotage you & your business.
The above steps will drastically reduce the chargebacks on your merchant account. Chargebacks will continue to be a hassle for basically anyone doing business in the United States (and elsewhere), but, with what you've just discovered, this "hassle" doesn't have to put your merchant account at risk!
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