How to Reduce Chargebacks – A Definitive Guide

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Libby James
Merchant Services Expert

Libby James is co-founder, director and an expert in all things merchant services. Libby is the go-to specialist for business with more complex requirements or businesses that are struggling to find a provider that will accept them. Libby is regularly cited in trade, national and international media.

What are chargebacks?

A chargeback, by definition, is a demand by a credit-card provider for a retailer to make up the loss on a fraudulent or disputed transaction. If you’re business is taking mobile or online payment it’s important to be aware of this and have a chargeback prevention strategy in place to reduce chargebacks occurring.

If a costumer denies a payment illustrated on their bank statement or claims not to have received goods then they will be reimbursed immediately by their bank or credit card company. In the UK this applies to transactions worth less than £100, commonly known as the chargeback scheme.

Chargebacks can be a complicated and expensive problem, and a lot of merchants make mistakes when it comes to fighting chargebacks. Resolving a chargeback dispute can be lengthy so it’s important to know your chargeback rights as a merchant to help your case.

It isn’t possible to stop chargebacks completely if you want to know how to reduce chargebacks there are measures you can put in place.

We have created some tips to keep to try and avoid these as much as possible –

How to stop chargebacks

  • Use a trading name that is easily recognisable when consumers are searching statements. It will help them connect this to the purchase and avoid an unnecessary chargeback dispute.
  • There is chargeback insurance for merchants available – it may seem like an expensive outlay but worth the investment if you are stung with a bank chargeback fee. It’s important that there is chargeback protection for merchants in place, and more importantly that you use them.
  • Provide your customer with as much information as possible at point of sale. This will help minimise returns or questions around the service your company has provided. Detail is key.
  • Make sure you have a dedicated person or team in place to deal purchase queries and returns. This way, instead of issuing a chargeback immediately the customer can contact your company first to resolve any issues before a chargeback procedure is put in place.
  • The period between the consumer paying for a service and product is also critical as people can get inpatient. If it’s taking weeks to receive an order (and the customer wasn’t expecting it) they are more likely to issue a chargeback. Communication is vital to manage expectations.
  • Offer refunds. Chargebacks are in place to protect the customer and by offering refunds on products or services you are reinforcing your confidence in your brand and developing a sense of trust with the customer. IA product refund is much less hassle than dealing with a chargeback, so it’s worth considering.

Chargeback fees

Chargebacks can be costly and time consuming to businesses; a fixed administration fee will vary between suppliers. It is charged by the Payment gateway and merchant account providers, each time a chargeback occurs.

Chargeback time limit

Typically the customer has 120 days to claim a chargeback – this depends on the type of goods that have been purchased. The time limit for chargebacks usually starts from the day a customer flagged a problem to the merchant. This time frame can vary but there is an overall cut off point for Visa transactions of 540 days.

If the purchase was made online then this timeframe would begin from the day the customer received their goods. The exception to this rule is when purchasing flights. If the airline or travel agent goes bust before the date of travel then the chargeback would be from breach of contract (the day the flight was due to happen.) However, if the passenger is informed that the flight wouldn’t go ahead prior to the date the contract hasn’t been broken therefore a chargeback wouldn’t apply.

Fight a chargeback

If you want to dispute a chargeback you should equipped with evidence to support your claim, including:

  • Tracking number for items posted or signed for
  • Proof of refund, if one has been issued
  • Any communications between the company and purchaser
  • Tracking, and regular updates such as order received, item dispatched etc.

With the above details available you have a much higher chance of reversing chargebacks. Banks will have an individual chargeback procedure, so do some research into the bank you are under dispute with.

Chargeback fraud

Visa recently reported 70% of chargebacks were actually fraudulent. The majority occur when customers make payment for goods and claim they never receives the items this is done with their own card, more commonly known as ‘friendly fraud.’ The other type of fraud committed is done using stolen credit or debit cards.

These are our guidelines to help your business put chargeback prevention measures in place to help stop chargebacks altogether.

If you need advice on an existing chargeback claim or simply want merchant services chargeback information get in touch. Our team of experts are available to offer advice on measures you can implement to avoid chargebacks for your business.

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Libby James

Libby James Co-founded Merchant Advice Service alongside David Bird in 2016. Her finance background, coupled with retail and customer service experience, gave Libby the drive to bring transparency and non-biased advice to the world of merchant services. Having come from the heavily regulated mortgage and insurance industry, Libby found it puzzling that other financial sectors lacked regulation and transparency leaving customers confused and unable to make informed decisions when it came to accepting card payments. This was soon to become Libby’s obsession!

With the help of some of the industry’s best, Libby began to research acquiring banks, complex terminology/regulation, and the problems customers experience within merchant services and payment gateway markets. She spent years on sourcing solutions for complex clients, which previously others were unable to assist with. Libby established relationships with brokers and banks which would soon form the cornerstone of Merchant Advice Service. As a result Libby has been featured in high-profile publications across the web.

Libby is proud to be the entrepreneur’s champion, supporting start-up businesses regularly. Her industry insights can often be found on LinkedIn where she provides free of charge advice and money saving pointers. It’s safe to say she has her finger on the pulse of everything card payments related.

Libby speaks of her experience in founding and running Merchant Advice Service…

‘Merchant Advice Service is one of my greatest achievements to date. We help business owners to overcome card processing issues which can become detrimental to their business. We assist SME’s in finding suitable card payments solutions, helping them create their vision. Each and every day is different, exciting and fore filling. As technology advances I can’t wait to see the way in which the merchant services market advances, and I’m pleased that our business will play a part in educating company owners along the way.’

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