Chargebacks are expensive, time consuming, and can cause your merchant account to be shut down by your credit card processor. Thankfully, there are a number of techniques, tools, and tips that a business can use to dramatically reduce the headache and negative business consequences of dealing with chargebacks.
Unfortunately, most small and mid-sized businesses don’t fight chargebacks at all (only 60% of chargebacks are disputed by merchants, and that’s heavily weighted to large merchants), and those that do, generally do a pretty bad job (only 41% of chargebacks are won by the merchant, and that’s also heavily weighted to large merchants).
That means small and mid-sized businesses, particularly those in the high risk merchant services space, are losing tens of millions of dollars each year to uncontested or poorly contested chargebacks.
For that reason, we reached out to some of the leading chargeback management consultants, professionals, and service providers for useful tips to help you reduce, manage, and win chargeback disputes in your business.
So without further adieu, here are 52 Tips to Reduce Your Chargebacks… From the Experts.
Got Tips? Let’s Hear ‘Em
This article is regularly updated. So if you have a chargeback tip to add, email us.
Tips for Avoiding Chargebacks
Avoiding chargebacks altogether is almost always preferable to fighting them. Effectively avoiding chargebacks requires you to take the time to properly set up your merchant account, payment gateway, sales process and train your sales team. When done properly, it can have a dramatic impact on minimizing the number of chargebacks you receive.
Unfortunately, without expert guidance, you’ll likely make as many mistakes as advances, as the process isn’t intuitive. To help you out, our experts contributed some incredibly useful tips on how to maximize the number of chargebacks your business can avoid.
1. Excellent Customer Service, Can Cut CB’s 18%
Roughly 18 percent of all chargebacks are product or service related; which can be avoided by providing truly awesome products or services and backing them up with even more stellar customer service and support.
2. Use a Properly Calibrated Front-end Fraud Filter
To avoid fraud/unauthorized chargebacks you need to have front-end transaction scoring and filtering in place. However, a close eye must be kept on this because it is quite easy to be too strict with filters which results in increased false positives.
Most chargebacks merchants receive are coded as fraud / unauthorized but most of those are ultimately won in the Response process because they are actually Chargeback Fraud or Friendly Fraud. 56 percent of chargebacks we fight are coded as Fraud / Unauthorized and we win just over half of them.
3. Descriptor recognition is KEY.
Tell the customer what will appear on their CC statement at the time of the sale, in an email confirmation after the sale, when the product is shipped out., and once more on the packaging slip. We find that these days some consumers can be forgetful so reminding them of the descriptor several times helps avoid a ‘friendly CB’
4. Have a Clear Refund Policy.
Offer a clear and reasonable refund option and communicate with the customer to be sure they are satisfied with the purchase. This way they will not just call their bank when unhappy instead of calling you.
5. Quality is King.
Offer a quality product and service! A customer is less likely to initiate a chargeback if they are happy!
6. Make contracts transparent
Ensure contact details are clear and easy to find on website and all documents (invoice, emails etc.).
7. Basic Maxim, but True…
Work with cardholders to resolve disputes. It is almost ALWAYS better both from a customer service perspective, and a financial perspective to try to reach a mutually acceptable result with the client, rather than resorting to the chargeback process.
8. Attach Delivery Confirmation to Representment
If you are shipping goods to your clients via carriers, always use trackable delivery method and attach the delivery confirmation to a re-presentment.
9. Limit Ongoing Service Contracts
In case you render services, limit delivery time. The period you are liable to chargebacks counts from the time of delivery, not from the day transaction was made.
10. Confirm Credit Card in eContract
To protect yourself against fraudulently coded chargebacks, list the first 6 and last 4 digits of customer’s credit card number in the electronic contract. The contract validity is confirmed with client’s signature.
11. Put Phone Number on First Line of Descriptor
Make every attempt at getting your phone number on the first line of your descriptor. While many banks allow for a second line of information, this rarely prints on credit card statements, and online systems usually require a “click to expand”.
12. Leverage 3rd Party Data to Stolen Card Fraud
3rd party services like Feedzai, CyberSource, Kount and NoFraud in conjunction with a fast manual review process will help you prevent the acceptance of stolen payment card info.
13. Have a Clear Refund Policy.
For restaurants especially, fraudulent sales often come from employees. When employees know a fraud detection system is in place, however, there are less fraudulent sales. Daily investigate your transactions – what refunds are being issued, how many checks are being cancelled, how many discounts are being offered, and by whom – and look for unusual activity in your point of sale system.
14. Use EMV and the Cloud.
Use an EMV-compliant and cloud-based POS system; the ability to verify payments locally using EMV systems will result in fewer fraud-related chargebacks as the number of lost and stolen credit cards and the prevalence of skimming decline. With a cloud-based POS system, receipts and orders will be stored online instead of on paper, making receipt clutter a thing of the past.
15. Swipe, Don’t Type
Always physically swipe credit cards rather than manually keying in the number. This is the best way to protect against chargebacks, especially fraud disputes involving incorrect charges. If a problem prevents cards from being swiped, obtain an imprint of the credit card to ensure proof that the card was present.
16. Businesses Using Affiliates Need Specialized Fraud Filters
Affiliate fraud is a unique genre of criminal activity and goes undetected with traditional fraud filters. Anyone using affiliate marketing to generate revenue should add an additional layer of protection. Chargebacks911 created Affiliate Fraud Alerts to help reduce chargebacks and advertising costs (like unearned commissions) while optimizing profitability.
17. Use an Answering Service with Humans not an Automated Answering
You’ll receive fewer chargebacks if a human answers the phone within 4 rings—24 hours a day, 7 days a week. Merchants who provide human-to-human engagement receive 30% less chargebacks when compared to automated IVRs.
18. Video Demos Reduce Chargebacks & Returns
If you sell a product then start making your own video demos in which the product is held, used, and described. We found that when you demonstrate the product in a video the number of returns fell immediately by almost 60%, and the number of chargebacks related to the product ‘not as described’ fell significantly as well.
19. Know Your Reason Chargeback Reason Codes
Your current and historical chargeback reason codes and resolutions are your best insight into preventing more chargebacks.
20. Use Technology to Automatically Score & Route Transactions
Leverage the latest tools and back them up with the latest knowledge and practices. Technology solutions such as automated transaction scoring, rules-based filters, transaction/customer profile databases, real-time transaction tracking tools, geolocation filtering and even 3-D Secure are great places to start.
Tips for Fighting Chargebacks
Once a chargeback has slipped through your initial defenses, it’s time to take swift action. Successful chargeback fighting is about balancing efficiency and cost with effectiveness.
It also involves understanding how your particular processor handles and counts chargebacks, and tailoring your approach accordingly. Check out the following expert advice to get your chargeback fighting organized.
21. Cautiously Issue Refunds
Refunding customers in an effort to keep down chargebacks can be counter-product if the customer has already disputed the charge, because it makes a chargeback reversal more difficult. Therefore, you should always attempt to confirm with the customer that they haven’t contacted their issuing bank and disputed the charge before refunding.
22. eContracts are Essential for Service Businesses
Incorporating eContracts is tremendously important for service businesses. Train your staff to send and receive an electronic contract after performing service and before processing a payment to dramatically improve your chargeback win ratio.”
23. Know How Your Processor Counts ‘Reversed’ Chargebacks
Some credit card processors tally your chargeback count based on how many chargeback disputes were initiated against you, regardless of whether you win or lose. Others remove from your count any that you’ve won. Knowing how yours works is important to developing your company’s strategy for either refunding or fighting chargebacks when a disgruntled customer complains about a charge.
24. Discuss Chargebacks With Your Processor Regularly
Have regular calls with your processor and make chargebacks a standing topic to discuss. They have both a different perspective and lack of knowledge about your business. Discussing both regularly can help you win more chargebacks.
25. If You’re Using Recorded Voice Confirmations, Switch to eContracts
Unfortunately, the chargeback representment system is stuck in the stone ages. Documents are still literally being faxed back and forth. That’s why voice based order confirmations and customer authentications are far less useful in fighting and winning chargebacks than an IP based fingerprinting and eContract system. That’s because these documents can be easily transmitted via fax.
26. Be Creative About Gathering Representment Evidence
When presenting evidence in a representment, think outside the box and be creative with compelling evidence; there’s a lot of data available, use it!
27. Don’t Take It Personal
Customer acquisition costs and your reputation are not always lost just because a chargeback occurs. Chargebacks can be a misunderstanding and the customer relationship can be maintained; reach out and get clarification.
28. When Fighting Chargebacks, Use Device Fingerprinting & Social Mapping
A response to a chargeback which includes the purchased date and shipping information isn’t enough. Stitch together everything from social chatter to device fingerprinting to build your case.
29. Leverage 3rd Party Data to Stolen Card Fraud
3rd party services like Feedzai, CyberSource, Kount and NoFraud in conjunction with a fast manual review process will help you prevent the acceptance of stolen payment card info.
30. Fighting CB’s Improves Issuing Bank Behavior
The best chargeback prevention tip is to engage in chargeback representment for friendly fraud. Disputing illegitimate chargebacks challenges this faulty consumer behavior. Plus, it encourages banks to perform more due diligence in the future and approve fewer cases of friendly fraud.
31. Manually Issued Chargeback Disputes are More Effective
Disputes should not be submitted until they’ve gone through a human review process. Cases generated through automation can include errors or omit essential information. This can damage the merchant’s reputation with the issuing bank.
32. Fight All Friendly Fraud
We find in better than 60% of friendly fraud cases the customer never even contacts the retailer, so it’s not a failure on the retailer but purposeful fraud by the customer. Customers somehow feel this fraud is not quite the same as stealing from the retailer—but it is.
Tips for Chargeback Best Practices
Chargebacks are best managed in a systematic way, rather than ad hoc. Therefore, incorporating chargeback best practices into your business is vital. Our experts offered useful best practices to deploy throughout your company.
From developing rules about which chargebacks to fight and which to ignore, to developing a methodology for effective fighting, to creating a customer feedback loop for all new products, these best practices are all about systematizing and streamlining your company’s approach to chargebacks.
33. Get, and Stay, In Front of the Customer
Create clear, consistent methods for contacting the company, including your billing descriptor!
34. Don’t Fight Losers, Fix the Losers
Only fight chargebacks where you can gather sufficient compelling evidence, where you can not, fix the reasons why.
35. Throw the Kitchen Sink At ‘Em
Always respond to chargebacks and always include all available evidence; including things you might think are irrelevant. If it relates to the transaction, include it.
36. You Won’t Win Them All.. But That Doesn’t Mean You Shouldn’t Fight
The chargeback ecosystem will always consist of a portion of legitimate chargebacks that you can’t recover. But with comprehensive management of the chargeback process, you can recover the revenue lost from chargeback fraud and friendly fraud.
37. Leverage customer reviews.
They can help you prevent chargebacks. Reviews are another key indicator of how your products and processes are experienced. Addressing a complaint or negative review by tweaking and improving your offer will prevent chargebacks.
38. Have a Structured ‘System’ for Fighting CBs.
Set yourself up for success with a structured data collection and response process that enables you to act quickly and comprehensively. This will enable you to minimize the time you are “out” the revenue lost to a chargeback.
Best Chargeback Resources and Tools
To manage your chargebacks effectively you don’t need to reinvent the wheel. There are a number of excellent tools, resources, and guides ready and available that you can take advantage of. The key, of course, is knowing which tool to use, and how to do so effectively.
Here are some tips and resources from our experts about chargeback related resources and tools they recommend for managing your high risk merchant account.
39. Read the Latest ‘High Risk’ Blogs
Reading low risk merchant services blogs is a waste of time for high risk merchants. And most of the high risk blogs are just super-thinly disguised marketing pieces. But there are a few good blogs out there that you should bookmark: UniBul, The ‘High Risk’ blog, by Soar Pay, the Chargeback Gurus Blog, mostly low risk but still worth reading: CardFellow Blog, and for a broader scope look at payments generally Pymnts Blog.
40. Free Downloadable eContract Templates
If you’re going to have your customers sign eContracts (which you should because it will dramatically improve your chargeback win ratio) make sure they’re actually effective at helping you win chargebacks. These downloadable sample eContract templates offered by Soar Payments are battle tested.
Understand Visa, MasterCard, American Express and Discover chargeback reason codes, get insights, examples and benchmarks for each.
42. Google, the Obvious Secret Weapon
There are lots of fancy tools to research the location, email address, physical address, and other customer information when fighting a chargeback. But sometimes the most effective (and free) one is Google.
44. SurveyMonkey (for Service Businesses)
If you offer a service and are in a high chargeback industry like Tech Support, or Credit Repair, using an eContract will help you win ‘I didn’t make that charge‘ chargebacks, but most of yours will be ‘The Service Was Bad‘ type chargebacks. If you incorporate a customer satisfaction survey system, like SurveyMonkey, immediately after the service for all of your businesses, you’ll be able to overcome all of those chargebacks.
That is, either the customer is satisfied with the purchase, and states so on the SurveyMonkey customer satisfaction email (which tracks their IP), or they’re not, at which point you just void the charge.
If a customer tries to dispute a charge after giving you 5 stars and saying they were satisfied, they’re not going to win that chargeback dispute very often.
45. A Little Self-Promotion, But I Believe It…
Bonus Tips from the Experts
Our contributors submitted so many excellent chargeback management tips, a bonus section was added to this article in order to provide our readers with even more sage advice.
These tips range from learning how to philosophically approach chargebacks in the most effective way, to brass tacks tips on how to recover some of the legitimate sales you’ll likely lose due to false positives once you start implementing a front end fraud filter.
46. The Goal Isn’t Zero Chargebacks
Your industry has a benchmark chargeback ratio, get to know it and get comfortable with it because the only way to avoid chargebacks altogether is to stop accepting cards.
Chargebacks are a powerful lagging indicator of business operations; eliminating them completely would actually prove to be a grave warning of poor performance and profitability.
47. Know the Full Costs
For each dollar lost to fraud, online businesses will ultimately lose $2.40 in revenue due to associated chargeback fees, lost merchandise, and sales potential.
48. Monitor Sale Frequency Closely
Keep an eye on your daily batches (for small merchants) and hourly (for big ones) for any significant fluctuations. Scammers get greedy, so if a fraudster figures out how to break through your defenses, they’ll usually hit you a bunch of times. But if you catch them early enough, you can void them.
49. Offer ACH to Reduce Payment Declines
If you’re serious about preventing ecommerce fraud and chargebacks, then you’re going to put enough restrictions on your checkout page that you can expect 15-20% of all credit card transactions to be declined. Unfortunately, you’re going to lose a lot of legit customers that way too. So by offering ACH (check payments) as an alternative form of payment, you can recoup many of the legit customers who accidentally get filtered out by your credit card processing fraud filters.
50. Integrate Caller ID and Online Ordering to Speed Up Transactions.
When taking online and telephone orders, always identify the credit card correctly on POS systems and terminals. With caller ID ordering and online ordering integrated in the point of sale, the system will remember the customer’s card number every time.
51. Don’t Go Overboard With Fraud Prevention
Don’t get carried away with fraud prevention. Most chargebacks are Chargeback Fraud and Friendly Fraud. Aim for a healthy chargeback ratio in line with your industry.
52. Deposit Holds Usually Aren’t Just Glitches
If your acquirer suddenly implements a revenue hold or regular deposits aren’t received, don’t assume it’s merely a technical glitch. These are indicators that the bank has determined your chargeback ratio has become a liability—and your account will probably be closed by the end of the month.