Are you ready to prevent chargebacks? Chargebacks impact businesses negatively and have the potential to bring your business to its knees. That is the last thing you want to happen to your hustle when seriously focusing on growing it. Sadly, if you accept credit cards, you must be prepared to prevent and protect yourself against unfair chargebacks.
If you are currently experiencing a chargeback, we have an article already written on how to handle a chargback.
But how can you prevent this unfortunate truth from hurting your business often? The first and most crucial step to preventing and protecting yourself from chargebacks is by clearly understanding why customers disputer charges. That way, you will shield your business from consecutive chargebacks.
With that in mind, let’s have a look at the reasons that trigger customers to dispute charges and the cure for those reasons.
Customer did not receive the item ordered
This is one of the obvious reasons why your customers are likely to dispute charges. Consider a scenario where a package was delivered and left on the porch because the customer was not home. If that package goes missing, most of them go missing, that customer will definitely dispute credit card charges. Now consider when more customer disputer charges. That is how bad it can get.
Making sure your customers receive and acknowledge they have received their packages is the only way to address this. If a customer is not available to receive a package, don’t leave it behind. Wait until he is available.
Customer does not recognize the store
Another mistake and which hurts many small businesses is accepting credit cards without paying much attention to how charges appear on the customer’s end. If customers fail to recognize the name of the seller, there is a high chance they will dispute charges. The best way to address this is by making sure the name of your business appears well on the customer’s statement. A good payment descriptor will make your work easier if you find it challenging to make your merchant name and other details appear well on customer statements.
Customers feel they were incorrectly billed
Your customers are also likely to dispute charges if they notice additional charges they are not aware of when making a purchase. To prevent chargebacks, make sure all charges are clearly indicated and well elaborated. Surprising them with additional costs will only lead to chargebacks.
Failure to follow processor protocol
Every payment processor has its terms and conditions when it comes to accepting credit cards. For example, some processors may require you to capture additional information such as customer IP addresses or social media profiles to process payments. If you don’t follow all protocols, the processor may proceed to initiate chargebacks without notifying you in case of disputes. To avoid rubbing your payment processor the wrong way, always adhere to the defined protocols all the time.
Failure to deal with customer services promptly
Another way to stop chargebacks is by addressing disputes immediately. You can do this by responding quickly to chargeback notifications. Most card processors send notifications before processing chargebacks. If prompt, you can try to settle the matter with your customers once you receive those notifications. If your card processor doesn’t send chargeback notifications, consider shifting to another processor.
Reduce merchant error
There are various ways you can reduce merchant errors that trigger chargebacks. One sure way is adhering to payment networks’ rules and regulations. Other ways include tracking shipments, insisting on delivery confirmation, and monitoring suspicious activities.
Train your employees
Are your employees trained to handle chargeback issues? If not, make sure they are prepared to handle chargebacks cases when they pop up. It is much easier to prevent chargebacks when you work as a team.
Consequences of chargebacks
If you fail to prevent chargebacks, prepare for the worse. Some of the things to expect include:
- Excessive fines and assessment fees
- Processing agreement termination
- Reputational damage with issuing banks
- Inability to process credit card transactions in the future
- Inefficient distribution of valuable resources
- Industry penalizations that negatively impact sustainability
- Extra administrative tasks like mitigation plan creation and implementation
What to do when chargebacks occur
Open every letter or email from your payment processor
Never ignore any letter or email sent by your payment processor as they often send chargeback notifications before moving funds from your account. Promptly responding can help settle the issue before it is too late.
Contact your customer if appropriate
If you can approach your customers first, the better. Sometimes the reason fuelling a customer to dispute charges could be a small issue you can handle immediately. For example, consider when the customer is not aware your business is behind the charges.
Gather all documents regarding the purchase
To verify the charge, you may be required to present or have some documents, including proof of delivery, invoice, and so on. So make sure you have all these documents; otherwise, it will be challenging to stop chargebacks.