You can’t ignore chargebacks when running a business. Assuming your business accepts payments in the form of credit and debit card transactions, you may experience chargebacks. Some reports suggest that a half-dozen out of every 1,000 card transactions involve a chargeback. What are chargebacks exactly, and how do you prevent them?
What Are Chargebacks?
Chargebacks occur when a consumer disputes a transaction made with a business. The consumer reaches out to his or her bank or card provider and, thus, initiates a request to reverse the charge. Chargebacks can occur for various reasons, such as fraudulent transactions, dissatisfaction with a product or service or billing errors.
Chargebacks can prove costly for businesses, as they often result in lost revenue, fees and additional administrative work. Your business will lose revenue from chargebacks. With each chargeback, money will be transferred from your business to the consumer. You may incur chargeback fees and other related expenses associated with them as well. To prevent chargebacks with your business, consider the following measures:
How to Prevent Chargebacks
Creating a clear and transparent billing policy can protect your business from, chargebacks. Consumers should know exactly how they will be billed when purchasing your business’s products or services. Otherwise, they may not recognize the transaction on their bank or card statement. This can lead consumers to initiate a chargeback — something that can be prevented with a clear and transparent billing policy.
Offering excellent customer service can help address complaints or concerns promptly and effectively, which may prevent chargebacks. When consumers have a positive experience with your business, they’ll be less likely to initiate a chargeback. Responding to customer inquiries, providing refunds or exchanges and resolving disputes in a timely and satisfactory manner can help prevent chargebacks as well.
Don’t forget to implement fraud detection tools. While chargebacks often have different causes, the most common cause of chargebacks is fraud. Fraudulent chargebacks typically result in a chargeback. The victim of the fraudulent transaction will initiate a chargeback with his or her bank or card provider Implementing fraud detection tools like address verification systems (AVSs), card verification value (CVV) checks and risk scoring models can help identify potentially fraudulent transactions and prevent chargebacks resulting from fraudulent activities.
By following these tips, you can reduce the risk of chargebacks and protect your business’s revenue, reputation and customer relationships.
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