Chargebacks can be the bane of most businesses’ existence. Although there are certain steps that can be taken to avoid chargebacks, they have become prevalent today, especially with the growth of technology and the internet.
What is a chargeback?
Simply put, a chargeback refers to a reversal of funds that have already been transferred. It occurs when the customer goes to their card issuer and disputes a charge with a merchant as opposed to going directly to the merchant. As such, a credit card chargeback is simply a sale that is refunded to a customer after a dispute is made but without letting the merchant know directly! Chargebacks are not only costly for merchants but they could also have severe consequences for a business. There are many reasons why chargebacks occur including:
- Customer dissatisfaction with a product or how service was delivered
- Non-delivery or goods to a customer
- A customer fails to recognize a charge
- Fraud
Chargebacks are unavoidable for any business that accepts credit card payments. When a customer initiates a dispute, the charges on the card are usually reversed by the card issuer and the merchant is typically the one that suffers as funds are deducted from the merchant’s account.
Credit card companies usually keep a close eye on the number of disputes or chargebacks a merchant faces. If the percentage of the chargeback ratio exceeds 1%, the penalties, and fees that the merchant has to deal with also increase. There is also a possibility of the merchant account being canceled and the merchant will no longer be able to accept credit cards.
How to reduce chargeback ratios - 3 hints:
There are a number of steps that businesses can take to reduce their chargeback ratios including:
- Communicate with Customers
We recommend open and clear communication with customers so that they can fully understand the service or product being provided. This is the first step to reducing instances of chargebacks. Most customers fail to contact a merchant before a dispute and providing customers with information about what to expect when they receive their credit card bill can help to reduce instances of chargebacks.
- Utilize a consistent company name
If a customer fails to recognize the name of a business on their credit card statement, it will more than likely lead to a chargeback. To avoid this from happening, merchants should stick to one company name for consistency, especially where franchises and different store locations are concerned.
- Document all sales
Keeping detailed records of orders fulfilled can improve your chances of responding to chargebacks. You must have a receipt but, for instance, it helps to keep evidence in form of video or photographs when opened packages are returned if the item returned seems undamaged as it will improve a businesses’ chances of winning against a chargeback.
At the very least, reach out immediately. Most chargebacks can be disputed amicably as long the merchant reaches out to the customer in time. If any issues arise, merchants should aim to have them resolved as quickly and efficiently as possible to avoid future problems from taking place.
Agapay partners with a few companies that can assist in mitigating chargebacks. We also have wonderful software to help you keep things organized. If you are worried or having trouble with chargebacks, call Agapay today!