A chargeback is a transaction disputed by the cardholder or issuer. There are many reasons for chargebacks, but the most common are returned merchandise, terminated services, disputes, errors, or fraud. Chargebacks can be a costly part of accepting credit cards. However, merchants can significantly lower the number of chargebacks they receive by implementing a few simple changes in their credit card processing and customer service. Listed below are several useful suggestions and best practices to help you achieve maximum customer satisfaction and minimize chargeback disputes.
The following recommendations can be used on all types of transactions to keep chargebacks as low as possible.
- Quickly process refunds to your customers. Any delay in issuing a credit can result in an avoidable chargeback. You may also consider using OrangeCRM’s chargeback auto refund feature, which will automatically issue a refund for all purchase transactions that were processed after a transaction that has been charged back.
- Make transactions easy to identify. If a cardholder does not recognize a charge on their billing statement, they may question or dispute the transaction. Choose a meaningful billing descriptor that will easily be recognized by customers and will help them associate the charge with the product or service they ordered. Sending a purchase confirmation letter or email that identifies the billing descriptor that will appear on the cardholder’s statement will also prove helpful. As an additional preventative measure, ask your merchant service provider to include your customer service phone number with the billing descriptor, so customers can easily contact you directly to inquire about the transaction.
- If the merchandise or service will be delayed, advise the cardholder in writing of the delay and the new expected delivery or service date. If an item is out of stock or is no longer available, offer the cardholder the option of purchasing a similar item or canceling the transaction. Do not substitute another item unless the customer agrees to accept it. By giving the customer notice and the option to cancel, you may help avoid a customer dispute regarding the merchandise and a possible chargeback.
- Always respond to a retrieval request as soon as possible. A retrieval request is a request from the issuer to provide a copy of the transaction receipt on behalf of the cardholder. An untimely or unfulfilled request could result in an irreversible chargeback.
- Hire a chargeback management service. OrangeCRM integrates with most chargeback management service providers, allowing them to manage and update your customer and transactional data. Not only will they save you a substantial amount of time by gathering the necessary documents and responding to disputes on your behalf, but their extensive knowledge and experience can also help reduce the amount of chargebacks you receive and increase your number of wins. They will provide you with valuable suggestions and proven ways in which you can improve your business processes in order to minimize your percentage of chargebacks. They also stay up to date on all of the latest dispute rules and regulations for each credit card company, which means they know the exact wording to use and the supporting documentation that is needed to achieve the best possible result.
Card Not Present Transactions
Mail Order, Telephone Order and Internet transactions are more prone to chargebacks. Here are some ways to reduce the risk of chargebacks for fraudulent or unauthorized claims, which are common for Card Not Present transactions.
- Use OrangeCRM’s Black List feature to prevent future purchases from high risk customers, block specific credit card numbers and bank BINs.
- Reduce potential fraud by preventing multiple orders from the same customer. OrangeCRM helps you do this by automatically checking for a unique credit card number on each new customer record.
- Enable Address Verification Service (AVS) for your transaction processing. AVS is a fraud reduction service that allows you to verify a cardholder’s address prior to completing the sale. The AVS system indicates if there is a full, partial or no match response on the address by comparing an address in the card issuer’s database.
- Verify the CVV2/CVC2 security code at the time of sale. This is an additional security feature for card not present transactions that can reduce potential credit card fraud.
- Obtain a manual signature whenever possible. If you sell goods or services on a website, be sure to require an electronic signature that indicates that the customer authorizes the order and accepts the terms and conditions. If you take telephone orders, it can be very helpful to have signed proof of delivery to serve as evidence that the customer received and accepted the shipped merchandise.
Recurring and Installment Transactions
A recurring transaction is payment for goods or services that are received repeatedly on a prearranged schedule. An installment transaction represents a single purchase, with payment occurring on a schedule agreed by a cardholder and merchant.
- Disclose the terms of recurring or installment transactions in writing, including shipping and handling charges and taxes.
- Make sure your customers are aware of your policies regarding merchandise returns, refunds and service cancellation at the time of purchase. Failure to disclose such policies at the time of the transaction will be to your disadvantage should the customer return the merchandise.
- Ship merchandise before processing the initial transaction. If customers see a charge on their statement before they receive the merchandise, it could lead to a preventable chargeback. You may consider charging a small shipping fee upfront so that you will already have the customer’s credit card details before the product is shipped.
- Stick to the set billing date unless the customer requests a change. This will help ensure that the cardholder’s funds are available. Some are on a fixed income and plan their expenses according to when they get paid. Charging them earlier or later than expected could cause problems for them and lead them to do a chargeback.
- Take immediate action when a customer asks to cancel a recurring transaction. Failure to respond to customer cancellation requests almost always leads to chargebacks. Notify the customer in writing that the service, subscription or membership has been cancelled and state the effective date of the cancellation. Prompt action can reduce the risk of repetitive chargebacks by the same customer.