Any company that receives a massive number of credit card orders, faces a grave threat of chargebacks. If you’re unaware, a chargeback is when a customer reverses any payment against an order they made from you, demanding their money back. Chargebacks were originally created to protect customers from fraudulent and unscrupulous merchants. Instead of endlessly arguing about unethical and unauthorized charges, customers would simply ignite a claim for chargeback and get done with it. More and more consumers who have never been wronged in any demonstratable way are using chargebacks just to claim money.
Regardless of the reason of chargeback, they all can create a havoc on the cash-flow of your business. Below we have mentioned several ways you can protect your company from charge back.
The most immediate, practical way a business can prevent frivolous chargebacks is to maintain proof of all credit card orders. The importance of proof and documentation cannot be stressed enough. If you have no physical record of a customer authorizing a charge, the customer can get their chargeback uncontested, even if they did, in fact, authorize the charge. On the other hand, if you have a print or email record of the charge, customers cannot get chargebacks as easily.
Even if the customer gets their chargeback initially, there will be what is known as a “retrieval period” during which an investigation occurs. Businesses that can furnish documented proof that disputed transactions were properly processed can get chargebacks reversed – and prevent possible cash flow problems.
The best and most legitimate way for a business to prevent any frivolous chargebacks is to maintain complete record and proof of all card orders. If you have no physical proof or documentations about the orders, your customer can get their chargeback uncontested, even if they did for a fact have an authorize charge.
The advice above will help protect you against honest errors and brazen consumer fraud. However, businesses can also limit the number of chargebacks they receive by offering stellar customer service. More than anything else, good customer service helps to repel refund-related chargebacks.
For one thing, customers who feel they have been taken care of are less likely to request refunds in the first place. But even when refund is requested, a kind and courteous employee can often defuse the situation.
One closing point to ensure a reduction in chargebacks is working with your merchant account to have a branded URL to show on your customers’ statement.
Some of you may be familiar with this tactic from a 37 signals post back in January of 2009 where they talked about how they encountered a lot of confusion with their 37 signals company name vs. their customers’ knowing them better as Basecamp.
Our sister company Grasshopper has implemented this tactic with some great success.
By using a URL that specifically talks about tackling chargebacks on customers’ statements, Grasshopper has been able to reduce their amount of billing related support calls, reduce chargebacks, and increase customer retention.
In short, preventing chargebacks requires a two-pronged approach of firm, relentless documentation of everything sales-related and providing excellent customer service. Anything pertinent to proving a credit card transaction occurred must be documented and retrieved in the event of a dispute. At the same time, your business should take care of customers such that they are less likely to request refunds.