Chargebacks are an unfortunate reality of accepting credit card payments, but they aren’t something businesses have to lie down and accept without a fight. Some chargebacks are completely legitimate, like cases where a purchase was made fraudulently by a third party. But many chargebacks are fraudulent, frivolous, or abuses of the system. In those cases, there is no reason for a company to accept losing the revenue, the product, and the additional chargeback penalty, and fighting back is in order.
The first step in chargeback defense is to work proactively to stop them from happening in the first place. While merchants can’t prevent abusive or fraudulent chargeback requests, they can take steps to help minimize legitimate chargebacks.
Make it clear where the credit card charges are coming from:
One of the most common causes of chargeback requests is customers checking their statements and finding unfamiliar purchases. Worried about potential fraud, they then contact their card issuer and attempt to stop the payment. Sometimes this happens due to legitimate fraud, but many times it’s simply a matter of the customer not recognizing the payment descriptor – the name is shown alongside the transaction amount. It’s incredibly important that merchants make themselves easy to recognize by using descriptors that match their branding rather than numbered company names or parent corporations.
Ensure customer complaints are taken care of quickly:
Of all the valid reasons major credit card companies accept chargebacks for, a number of them relate to unsatisfied customers. Unreceived orders, products that don’t match their description, defective merchandise, and misrepresented purchase terms are a few of the many reasons customers can legitimately file a chargeback. The best way to defend against consumer disputes is to take care of them with good customer service before they ever reach the chargeback stage. Addressing customer concerns quickly and professionally, and issuing refunds where appropriate, is a far better route to take than risking getting nailed with a chargeback.
When chargebacks do come in, it’s extremely important that businesses handle them quickly and put up as strong a defense as possible to avoid the negative implication with card issuers and the hefty penalties, which can reach as high as $100 per instance. Successfully doing so comes down to understanding the system and knowing how and when to fight back.
The best response is a timely response:
A chargeback that doesn’t receive a response is a guaranteed loss, and waiting too long to respond isn’t much better. There are strict deadlines that merchants have to meet in filing their chargeback responses, and missing even one of them renders the entire process moot. Arguably the most important factor in filing a timely response is to find out about chargebacks as soon as possible. Some payment processors notify merchants of disputes by mail, which is slow and ineffective. Others, like BAMS, use SMS notifications to alert merchants as soon as a chargeback or retrieval request is filed. That speedy notification is invaluable when it comes to getting a strong defense filed in time.
Know the codes:
Each card issuer has its own set of criteria for what it considers a valid chargeback. Those reasons are managed using a set of codes, and every chargeback request will come with an associated code identifying the reason for the dispute. Understanding what those codes represent is key to filing a valid defense, so merchants absolutely need to be able to decipher them. Visa’s codes, for instance, are laid out in the Dispute Management Guidelines for Visa Merchants and cover four major areas – fraud, authorization, processing errors, and consumer disputes.
One of the best ways to avoid losses is to partner with a payment processor that understands how serious a concern they are for businesses and offers tools to help mitigate and manage them. BAMS offers a full suite of tools, including SMS notifications, an online dispute management platform, Verifi integration, zero-liability assurances, and more.
Contact us today to find out how payment processing with BAMS can help protect your business against unnecessary losses from chargebacks.