When businesses accept credit cards as a payment option, they run the risk of being faced with chargebacks: when credit card users dispute charges on their accounts and demand to be reimbursed for the purchases.
Chargebacks were designed to help credit card customers protect their accounts, and they still do, but they can also become a nuisance for businesses: Dealing with chargebacks can take valuable time away from employees, and it can be costly.
Moreover, frequent chargebacks can affect a company's ability to maintain a merchant account and accept credit card or ACH payments. Also, merchant account providers can impose steep fines associated with high chargeback rates, or they can put funds on hold.
All of that makes reducing the occurrence of chargebacks crucial.
The first step in doing so is to determine the causes of chargebacks. Sometimes, unhappy customers issue chargebacks in an attempt to get their money back without having to communicate with the business about the issue. Other times, the chargeback is a result of "friendly fraud": The customer received the goods or services, but still wants the money back. Another scenario is that the charges were actually fraudulent—i.e., not made by the credit card holder.
Determining the chargeback triggers can help you apply creative and useful strategies to help decrease the number of chargebacks you face. Although not all chargebacks can be prevented, you can take various actions to reduce their number.
Here are four tips on how to reduce the number of chargebacks your business handles.
1. Communicate with your customers
Take the first step (it's free).
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