Chargeback Prevention

Chargeback prevention by Instabill

Chargeback Prevention & Mitigation: Preparing Your Best Defense

Policies, procedures and chargeback protection for merchants

As an e-commerce merchant, you know that chargeback prevention is very much a part of your business. Odds are that every online retailer is going to experience a few chargebacks — unfortunately, some more than others. In moderation, chargebacks are normal—even expected. But too many can ruin your credit card processing capabilities and even cost you your merchant account. This is why chargeback protection for merchants is of the utmost importance.

The Common Reasons for Chargebacks

Chargebacks happen when a consumer contacts their credit card issuing bank to dispute a charge on their statement. Chargebacks can occur for any number of reasons, but here are a few common examples:

  • The transaction was fraudulent.
  • A customer doesn’t recognize the charge or forgets the purchase
  • A customer didn’t receive the purchases
  • The purchases were damaged
  • The product description was inaccurate or misleading
  • A customer was dissatisfied with the purchase
  • The charge on the customer’s billing statement differs from the price of the sale

Chargeback fraud is becoming more popular in the e-commerce world, with many fraudsters exploiting the chargeback process to get away with free goods or extra cash. Merchants should be especially vigilant toward chargeback fraud, as it can make online payment processing solutions harder to find.

Why Chargeback Protection for Merchants is More Important Than Ever

It is a lot easier nowadays for online merchants to fall afoul of the chargeback guidelines which were implemented Jan. 1, 2016. Prior to then, Visa’s chargeback mandate was 2 percent of sales or 200 hundred chargebacks in a month.

Visa revised its tolerance for chargebacks to 1 percent of monthly sales or 100 per month, causing high risk merchants to rethink their models. If a merchant crosses the 1 percent/100 threshold, they are placed in a probationary period until they can consistently maintain a chargeback level beneath the limits set by Visa and MasterCard.

5 Chargeback Prevention Tips

  • Send email confirmations to your customers following orders and shipments. This will help eliminate miscommunication.
  • Ship orders on time to prevent chargeback inquiries.
  • Screen your payment gateway for fraudulent transactions.
  • Require signatures upon package delivery. This can help you present evidence if you attempt a chargeback reversal.
  • Customize your billing descriptor with your business’s name.

Let Your Customers Know: A Refund is Always Better Than a Chargeback

Think of your business as you would a new car. Now think of a chargeback as a dent in that new car. After a few dents, the owner needs to go to the body shop to get them fixed. Too many dents and the car fails to run properly, eventually stalling.

A refund is a different story. It is true that too many refunds can hurt a business too, but banks have far, far more tolerance for refunds than they do chargebacks. The merchant and customer deal directly with one another to settle a refund — the bank is not involved. A chargeback involves the credit card issuing bank.

More often than not, if the merchant feels the chargeback is not justified, contacting the customer and offering a full refund is a very effective tactic in reversing chargebacks. Explain to the merchant how damaging a chargeback is and ask for a reversal.

More on Chargebacks and Payment Processing

As a global merchant services provider, Instabill is dedicated to educating merchants and consumers about chargebacks and how they can be avoided. For more on chargebacks, visit our blog to find the latest strategies on mitigation and prevention. To learn more about other services like our merchant accounts, simply contact us online today.