4 tips for tech support businesses to reduce chargebacks
If you operate in an industry like remote PC tech support your merchant services provider has probably explained that if your merchant account has a ratio of chargebacks which exceeds a certain percentage (typically 2%), your merchant account will be closed by your credit card processor. The reason, is that your processor can be heavily fined by Visa / MasterCard if they do not close your account, and that chargebacks can be a leading indicator of customer service problems in your business. So, it’s imperative to maintain a chargeback ratio below 2% for the long-term health and growth of your business.
How do I Calculate My Chargeback Ratio
But before we get to techniques to lower your PC Tech Support businesses’ chargeback ratio, it’s important to understand what is meant by a “chargeback ratio”. The formula for calculating a business’ chargeback ratio is the number of initiated chargebacks divided by the total number of monthly transactions.
# of Initiated Chargebacks
_________________________ = Your Chargeback Ratio
# of Monthly Transactions
Note that in most cases ALL customer initiated chargebacks count as part of your ratio, REGARDLESS of whether you win, lose, fight or don’t fight the chargeback. Let me restate that again, because it’s often misunderstood… if your customer complains to their issuing bank, and the issuing bank escalates the issue and seeks reimbursement, then in most cases a chargeback has happened, regardless of whether you ultimately win or lose the dispute.
That means that a lot of very legitimate remote technical support businesses, who, when given the chance, will win the vast majority of their chargeback disputes can still be in a situation in which their merchant account will be shut down for too many chargebacks. In sum, if you want to keep your merchant account open, the key is to minimize chargebacks, not merely to win them.
Below we’ll discuss three techniques that tech support businesses can use to reduce and maintain a low chargeback ratio, and thus keep their merchant account in good health.
1. Send Confirmation & Customer Satisfaction Emails
A chargeback starts with a dissatisfied customer, who, when deciding to dispute a charge, finds it easier to call the number on the back of their credit card (their issuing bank) than to call you, their tech support provider, to seek redress or a refund. So, one of the best ways to minimize the likelihood of having a customer initiate a chargeback is to make contacting you, the service provider directly, as easy as possible. Naturally this means making sure that your business’ customer service phone number is listed in your payment descriptor. But it also means obtaining the customer’s email address, and sending them a payment receipt, as well as a follow up email a few days later to ascertain the customer’s satisfaction. In both emails, you should be explicit, that your goal is 100% customer satisfaction, and if for any reason the customer is dissatisfied, they should contact you for a full refund.
There is a hesitation on the part of remote tech support business owners to state this, for fear that unscrupulous customers will take advantage and seek a refund in order to obtain free services, but the truth is, in a industry with the potential for high chargebacks such as PC Tech Support, tolerating an occasional abuse of the system is simply the cost of doing business.
2. Receive Customer Dispute Alerts
Once a customer has called their issuing bank, typically there is a 72 hour window in which, if a full refund is received by the customer, a chargeback will not be initiated. But to take advantage of this 72 hour window, the PC tech support business owner, must be aware of the dispute, which normally they are not.
Therefore, subscribing to a chargeback prevention service that will alert you immediately when a customer has initiated a dispute, enables the business owner the option to issue a full refund within that 72 hour window, and avoid the dispute rising to the level of a chargeback. Some high risk providers, such as Soar Payments integrates a chargeback alert service as part of it’s tech support merchant account service, however, it can also be obtained through third party providers.
3. When In Doubt, Start With A Full Refund.
When they receive a phone call or email from a dissatisfied customer, many well-intended tech support businesses try to resolve the issue either by providing free additional services, or a partial refund. In many cases, the customer states that they are happy with the fix, and the business owner thinks that the situation is resolved.
Unfortunately, however, in many cases, the customer still contacts their issuing bank to initiate a chargeback regardless of the resolution.
Therefore, in service industries like remote tech support with the potential for high chargebacks the default answer when any customer calls in with a dispute or are dissatisfied with the service is to issue a full refund. Then, once the full refund has been given, and confirmation of the same has been sent via email to the customer, the merchant can choose to offer an additional service to fix the previous error at a discounted rate. In so doing, the tech support business owner has eliminated the possibility of a chargeback, by issuing a full refund, and then gives the customer the opportunity to make, or not make, a new purchase of services. This prevents overzealous employees from trying to convince a customer that they can fix the problem instead of issuing a full refund, which inevitably results in a chargeback after the phone call ends.
4. Maintain High Transaction Counts.
PC Tech support businesses, like many businesses categorized as high risk, typically have low transaction counts and relatively high average sale amount (typically over $100 per ticket on average) when compared to most online businesses. Because customers are more likely to initiate chargebacks on large tickets and banks are more likely to escalate high-ticket charges to become chargebacks, PC tech support businesses frequently receive a higher percentage of chargebacks per dissatisfied customer. Coupled with their low number of monthly transactions, often means that they are in danger of exceeding the 2% chargeback ratio they need to maintain their merchant account.
Thus, while the first three tips in this article focused on reducing the number of chargebacks, this last one focuses on keeping higher monthly transaction numbers, which has the effect of lowering a tech support business’ overall chargeback ratio.
In addition to simply growing your business, common techniques to maintain high transaction counts are to break up packages of services into two or more smaller separate transactions. For example, a tech support business might choose to run one transaction for the initial hardware fix, and a separate credit card transaction for software they sell or a monthly monitoring service. This has the effect of generating two or more transactions with a customer, effectively increasing the total monthly transaction count. It is important to do this in a transparent way that makes sense to the customer, so that you make sure you comply with the card brand rules.
About Soar Payments Tech Support Merchant Accounts
Soar Payments is a provider of high risk merchant accounts to industries like remote PC tech support. By providing integrated chargeback prevention support, Soar Payments is able to provide a stable and affordable option for legitimate remote technical support businesses to accept credit card and ACH payments. To apply online visit: http://soarpay.com/online-application/