In the eCommerce marketplace, your goal is to sell your products to the customer so you can get paid. However, it’s not always that straightforward. When chargebacks occur, they can turn otherwise simple business transactions into tedious disputes with chargeback fees that can add up over time.By understanding how credit card chargebacks work, your business can take steps to streamline your credit card processing and reduce chargebacks.
What Are Credit Card Chargebacks?
Credit card chargebacks are reversals of credit card payments requested by customers and completed by the credit card company or bank. The chargeback process occurs when an individual contacts their bank or credit card company and requests money spent on a purchase be returned to them for one reason or another.
Originally, credit card chargebacks were created to protect consumers from fraud but that is not always the case for why chargebacks occur. While the cardholder may truly be a victim of fraud, in other cases consumers file for a chargeback with their bank or credit card company even if it was a legitimate purchase.
There are several types of credit card chargebacks:
- Credit Card Fraud – Customer chargeback when a card is stolen and used to make unauthorized purchases.
- Merchant Error – Chargebacks occur due to merchant error, such as when the merchant bills an incorrect billing amount.
- Friendly Fraud – This occurs when the cardholder receives the product or service but either changes their mind or does not recognize the charge on their billing statement due to forgetting about the purchase.
For merchants, credit card chargebacks are frustrating experiences, but some which are not going away in the near future. In fact, according to Juniper Research, chargebacks are increasing 20% each year. Not only is the process frustrating, but a chargeback fee for each disputed transaction can add up in cost - losing money for your business. However, there are some ways to reduce credit card chargeback fees.
High-Risk Merchant Accounts and Credit Card Processing
A high-risk merchant account is a payment processing account for merchants that are considered a high-risk service by an acquiring bank. While credit card processing is incredibly essential for high-risk industries since it allows merchants to gain access to processing services they would otherwise be unable to, high-risk businesses typically suffer from a greater percentage of credit card chargebacks.
Whatever the reason is for chargebacks (justified or not), credit card processing networks typically turn to banks to recover funds that have already been transferred to the merchant. Financial institutions often refuse to provide an account to businesses they categorize as high-risk as they prefer to not deal with chargebacks and other reversals.
However, high-risk merchants can gain access to credit card processing and other payment method services by utilizing a payment gateway and a merchant account. Through the use of payment gateways, high-risk businesses can help prevent excessive chargeback fees and make a bank more willing to work with them through a trusted payment processor.
5 Easy Steps to Avoid Chargeback Fees
Here are some steps to avoid credit card chargebacks - and the often complex chargeback process!
Use Detailed Descriptions Of Your Business’s Name
Friendly chargebacks can occur if customers don't recognize a transaction charge on their credit card statement. This can occur if the customer doesn’t know - or recognize - your company name. As a result, they may dispute the charge as fraud.
To prevent friendly credit card chargebacks, your credit card billing descriptor must be similar to your business name and your business products must have a proper description. Having a detailed statement descriptor can eliminate potential chargebacks by better informing customers about the purchase.
Adopt the Right Technology
Technology is advancing at such a fast pace that it’s crucial to keep updating your credit card processing. While there are many tools available, having an advanced payment processor can help prevent chargebacks associated with out-of-date payment platforms. The more security features and alternative payment methods available, the better suited your payment processor is at preventing credit card chargebacks.
Updated Security Measures
Credit card fraud is the primary reason for credit card chargebacks, accounting for 30% of all reversals. By implementing security measures, such as fraud protection filters in the payment gateway, you can help prevent credit card fraud and the ensuing chargebacks. Two common fraud filters are:
- Card Verification Code (CVV/CVV2): The CVV/CVV2 is a three-digit security code on the back of all credit cards. When a cardholder makes a purchase, they enter their credit card details, including the bank identification number, and the code. The card will be denied as a safety precaution if the security code doesn’t doesn’t match the issuing bank records.
- Address Verification System (AVS): This process forces the cardholder to enter their billing address when shopping online. The merchant can compare the billing address to the issuing bank documents; if it doesn’t match up, the card can be declined.
By using these security methods, you can help reduce criminal behavior and the transaction disputes that occur from them.
Increased Compatibility With Payment Methods
Find a payment processing solution that is compatible with a variety of payment methods and can accept digital payments from any location. Updated payment processors that are designed to provide multi-channel mobile payments will be less likely to cause service or merchant errors that can result in chargebacks. Modern payment processing allows for the most accessible and streamlined processing experience without hiccups that can result in disputed transactions.
Provide An Easy Refund Process
A flexible refund policy can provide a positive experience for customers who will likely not issue chargebacks. This includes providing an easy process for refunds; consumers should be able to make a simple request for a refund and have their refunds processed promptly. The more reliable the customer service process, the more likely that the concierge will issue friendly chargebacks. For instance, include the customer service number or email as part of the statement descriptor. This allows customers to quickly contact the right number when looking for a refund.
Prevent Credit Card Chargebacks With Transcend Pay
With a merchant payment gateway from Transcend Pay, your high-risk business can gain access to a variety of online payment processing services without being held down by potential chargeback fees. In addition to online credit card processing, you can also use our merchant gateway to send and accept payments with several distribution channels to provide a secure and reliable payment processing experience.
To learn more about how our innovative merchant gateway technology can help to transform your business and help your high-risk merchant account mitigate credit card chargebacks, contact our team today for a free quote.