How to Limit Chargebacks?

Lucas Dominic, CEO at SecurionPay

04.08.2016 02:00 pm

One of the major problems for the online merchants and companies that accept credit card payments is the possibility for the cardholder to try disputing the claim. In that case, the bank of your company will notify you about that and you will be billed a fee for the chargeback. Is it possible to prevent chargebacks?

Chargebacks bills can add up over time, and they can mostly damage online merchants whose ideal type of payment transactions is by using credit cards. The credit card processor usually mails a chargeback notification for the processing fee. This happens at the same moment when the account has been debited. It can take about couple of days before the chargebacks fees are posted on your account.

Understanding chargebacks

When you get a notification for chargebacks, it is essential to understand why and how you have received the claim. These fees can be reversed if you dispute the claim at your transaction processor. If that is successful, then you will get the amount that was originally debited from the credit card.

However, the credit card holder can still dispute this reversal. In that case, you will be additionally debited another chargeback fee. If the processor of the transaction refuses your claim then the chargeback fee will come into force. Many banks have variable services and different options, so it would be good if you get some professional advice on this matter.

The truth is, chargeback rules are more flexible for customers than for merchants.

How merchants can limit chargebacks?

One of the most important measure you can take to prevent chargebacks is to always carefully read the billing statement you receive. Check out the company name and make sure the name is visible, as well as properly and clearly written on the receipt. Make sure you issue a receipt to the buyer of your products or services. Also, make sure that the address on which you are offering services and sending goods is the same as the verified address, and quickly respond to the retrieval request. However, some major credit card companies, like MasterCard or Visa do not require sending of retrieval requests.

You are probably thinking about some ways in which the credit card processor will be able to protect you from getting chargebacks fees. Bad news is that the merchant is always responsible for these chargebacks fees. However, if you take some measures for preventing chargebacks you can minimize the number of received chargebacks. The chargeback processing fee may look small or insignificant, but in the long run it can damage the merchant’s ability to provide good services and to sell their goods. Chargebacks fees are variable from bank to bank, so check out and compare the fees of different banks.

Also, consider using the Address Verification Service (AVS), which compares the customer’s data (such as name, address etc.) with the credit card company’s information. When there is a mismatch, you’ll receive the notification that transaction should be declined or that you need to require additional information. Moreover, be aware of chargeback fraud, and pay attention to „friendly fraud”. It is when customer purchase the product and claims that it wasn’t delivered (but it was), or isn’t as described.

An important thing to always have in mind is that when you decide to work with credit card transactions, chargebacks fees simply cannot be avoided. The prevention measures against chargebacks may help your business to reduce the number of fees and save some money. Additionally, you should seek professional services when it comes to dealing with chargebacks fees that you want to get reversed.