Chargebacks occur when a customer disputes a charge made to their credit or debit card and asks the card company to reverse the transaction. While chargebacks are practically inevitable, and many merchants view the fees as part of the cost of doing business, excessive chargebacks can put a real dent in your profits, not to mention your good standing with your credit card company.
Fortunately, there are steps you can take to reduce their occurrence.
- Provide excellent customer service. Naturally, you want to do this anyway because it’s just good business. But good communication with your customers can go a long way toward minimizing chargebacks. Provide a contact phone number or email, and respond quickly to resolve any issues.
- Describe your items or services accurately. Your customers should know exactly what they are getting, and when they can expect delivery. When possible, use tracking numbers and signature confirmation when shipping packages, and consider buying postal insurance so you are covered if a package is lost or damaged in the mail.
- Avoid accepting fraudulent purchases by asking for the code on the back of the card, confirming the billing address with the customer if the billing and shipping addresses do not match, and calling the card holder personally to confirm any orders that seem suspicious. Most customers will usually appreciate your taking the extra step to ensure their security. Be alert for purchases where the billing and shipping address are from different countries, or the customer makes partial payments using different Paypal or credit card accounts. If you accept credit cards at the location of the sale, compare the signature on the receipt with the one on the card. Check for signs that the card has been tampered with or altered. You can also ask for a driver’s license or other photo ID.
The importance of minimizing chargebacks cannot be overemphasized. Most merchant account providers will view your company as a risk if you have excessive chargebacks, and may terminate or suspend your account. This can have a serious impact on your sales. The time and effort you put into reducing chargebacks will be well spent will enhance your reputation as a seller.