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How to reduce the risk of chargebacks


I want my money backA chargeback means returning funds to a customer. It’s forced by the issuing bank and causes merchants a lot of problems, wasting their time and money. So obviously nobody likes a chargeback. Most merchants will do a lot, to avoid them. Even if their policy doesn’t allow refunds, they’ll probably give one to a client just to make him cancel the chargeback request.

So how to avoid chargebacks?

I won’t delude you that there is one efficient method. Sorry, chargebacks are troublemakers for all merchants and it’s going to stay that way – at least for some time. But it doesn’t mean, that you can’t do anything to avoid them.

If you get a chargeback request, than you usually have some time to prove your innocence. This means convincing the bank, that the client’s request is unjustified.

But that’s fighting the symptoms. It’s just saving your hide, not avoiding the danger. Let’s focus on the causes.

Why do people ask for chargebacks?

Well, usually they just know it’s possible. A customer doesn’t care much about the method. He just wants his money back and doesn’t have to know about refunds, how much you don’t like chargebacks because of the additional fees etc. So the easiest way to avoid chargebacks is simply telling customers about this and making other methods more convenient.

Have a clear return process

Money back guaranteeShow your customers, that returning goods you sell is easy. Make the whole procedure sound clear and straightforward. ‘Whoa!’, you say, ‘why should I encourage them to return stuff?’. It may sound like this at first, but actually such policy has two mayor advantages.

First of all, if a client is determined to get his money back, he will fight for it. And you probably prefer to talk directly to him excluding credit card companies, avoiding extra costs etc. If a customer knows how to return a certain article – he will most likely do it that way. Otherwise, he’ll request a chargeback. Simple.

The second advantage is that such straightforward information makes the customer feel more safe. It not only about the money (he’d probably get it anyway) but it’s also about the necessary effort. If the whole return process sounds simple and painless, your client will more likely have the sense of no risk. He’ll make a decision and buy chosen goods.

Don’t be cheap on customer service

Truly, this is not the right way. It’s in your own interest to provide easy methods to contact the support. Clients (especially those angry or at least not satisfied ones) don’t like listening to instructions such as ‘If you are from Europe, press 1; if you…’. And they have enough lounge music after shopping in malls. They expect a real human being to take up their case. Their anger is enough, don’t make them furious.

A real person is more likely to convince a client not to request for a chargeback. He or she will help the customer with the return process in the most painless way for you. Furthermore, such client won’t be disaffected and perhaps will return in the future.

Deliver fast. Very fast.

Deliver fastThis is always an advantage. Obviously nobody likes to wait for weeks. Quick shipping will just encourage customers to buy and make them happy.

But wait, there’s more! We said before about causes of chargeback requests. One of them are decisions on impulse. People get excited, purchase something without much thinking and… the excitement goes down, second thoughts appear. And the longer the delivery takes, the more time customers have to change their mind. But when you give them the goods, it’s again less probable that they’ll request their money back.

Check who’s buying

There are antifraud databases, where information about “trouble making costumers” are stored. Simply check your clients, if they’re on such a blacklist. This way you’ll get to know whether one is a fan of chargebacks and who are you dealing with. You’ll know the risk.

Such list are made by big merchants, but are shared with smaller ones for free. A customer has to pay a certain removal fee to get erased.

There are also services, which check for any suspicious activity, for example multiple orders with different credit cards. That’s also might be worth investing.

Show that you’re not a loser

Not all clients are just not informed very well or a little clumsy. Sooner or later you’ll meet those, who think they’re clever. Apparently, many of them are not and in many cases it’s enough to say ‘boo’ and they’ll run away without causing any trouble.

State clearly what you require from your clients. For example, you might like them to leave a signature confirming, that they got the order. At least for those bigger transactions. Probably very few (if any) will have something against it, especially when you simply explain it’s for everyone’s good to protect from theft. And voila – fewer dishonest chargebacks.

Another way is requiring a Card Security Code – CSC ((also called CVV (Card Verification Value or CVC (Card Verification Code). Usually it’s a three digit number printed on a credit card.)). However, information about it is not encoded in the magnetic stripe. This means that only the owner of a physical card will have it’s CSC. So bye bye problems with account number generators etc.

You can also inform that frequent chargeback clients will be shared with other merchants (using the mentioned databases). It’s up to you where you write about it: privacy policy, during the ordering processes, in emails (confirmations, informations) etc. But if you do – make it clear. It might sound a little alarming for some people, but on the other hand honest customers don’t have to worry and you show others, that you’re not a loser.


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