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 reduce 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

Communicating with your customers is critical to ensuring the smooth processing of purchases. Customers should know how much they are expected to pay, exactly what that payment will entail, what they are getting for that amount, who is providing the goods or services, and what your return policy is. There should be no surprises, including additional fees or changes in the purchase, once the money has been transferred.

For online retailers, that approach means providing as much information as possible about items to ensure people know exactly what they are ordering. For example, clothing retailers could provide more information about the item than just the size. They could include specific measurements, along with information about the materials used, where it was made, and what size is featured on the model in the photo. Additional information can help customers make smarter purchases, leading to less confusion and reduced chargebacks.

Moreover, part of communicating is being available when customers have questions or concerns about a purchase. You should make sure your telephone number, address, and email are available in places your customers may look: your website, your social media pages, and on invoices.

Providing convenient contact methods can help them approach your business first, rather than immediately resorting to a chargeback.

2. Offer refunds for unhappy customers

If a customer contacts you and he or she is unhappy with the products or services, work with them to resolve the issue. Talk to them to find out what they are unhappy about, ask how you could resolve the issue, and, if necessary, offer an exchange or a refund. That level of commitment could help customers see you are willing to work with them without the hassle of a chargeback.

Refunds are never a good thing for a business. However, if customers are unhappy, they will do whatever is necessary to get their money back. That often means issuing a chargeback. Working with them could prevent the chargeback, and it can show them you are dedicated to getting it right. In the long term, a simple refund could help your business.

3. Render services or products quickly

When customers pay for goods or services, they expect to have the order fulfilled quickly. The longer your business holds a customer's money without providing those goods or completing the requested services, the more likely that person will be able to initiate a chargeback. The best way to avoid that is to fulfill the order as quickly—and accurately—as possible, keeping them informed through each step of the process.

For example, if your business handles primarily e-commerce transactions, you likely will be responsible for shipping out goods. Customers probably expect there will be some wait time in getting their products, but it still could be beneficial to be as specific as possible about the wait. If you know the order will take at least a week, let them know. Rather than having them become frustrated with waiting, let them know up front so they know what to expect.

If your business performs some sort of service, such as landscaping, you likely should not accept payments before the services are completed. Customers may feel they have been ripped off and could issue a chargeback, even if your business is credible and you did plan to uphold the agreement.

In short, there should be a short time between the transfer of money and the completion of the sale.

4. Work to prevent fraudulent transactions

When a customer's credit card information is stolen and used to make purchases, both the customer and the businesses where the purchases were made will suffer. The customer, understandably, will try to get the money back through chargebacks, and the businesses will have months of headache trying to resolve the situation.

The best way to avoid that scenario is to work to prevent fraudulent charges in the first place.

Although not all fraudulent charges can be prevented, businesses can take steps to work to against the possibility of fraud. For example, when a purchase is made in-store, a business could require identification with the credit card to make sure the person using the card is the cardholder.

For e-commerce retailers and other online purchases, avoiding fraud could be more complex, but there are some red flags to consider.

Businesses should beware of bulk orders that seem to be beyond the normal range, and they should be aware of big-ticket items. Both warrant scrutiny before being processed. The same applies for orders made within a short time frame, orders with an overnight delivery, orders that have different mailing and billing addresses, or suspicious international orders.

Businesses could require a CVV or CVV2 code for online purchases. This three- or four-digit number on the card could help to ensure the person making the purchase has the physical copy of the card. That's important, because most credit card fraud occurs with the card information, rather than the actual card itself. Businesses could also avoid transactions over the telephone or through mail.

* * *

Chargebacks, no matter how they occur, can be costly and time-consuming for businesses. Too many can actually cost your company the ability to process credit cards. Although not all chargebacks can be prevented, it is important to implement policies and plans that can help keep the number of chargebacks to a minimum.

One of the best things you can do is provide a high level of customer service. That, paired with a quality product or service, can decrease the chances of an unsatisfied customer's issuing a chargeback without first communicating with you. Also, fraud prevention techniques can help you avoid having to repay customers after instances of credit card theft.

Essentially, just a little more effort can go a long way toward avoiding annoying chargebacks.

More Resources on Reducing Customer Chargebacks

Seven Marketing Mistakes That Cause Chargebacks and Profit Loss

Three Marketing Mistakes That Are Costing E-Commerce Companies Revenue

Three Ways to Strengthen the Marketing and Finance Relationship 

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Sarah Blanchard is a payments industry writer at Soar Payments, provider of high-risk credit card processing on the Web.