5 Mistakes Merchants Make That Lead to More Chargebacks

5 Mistakes Merchants Make That Lead to More Chargebacks

January 17, 2019

[Editor's note: January is Chargeback Recovery Month at Card Not Present (sponsored by Sift Science). While many retailers count on the holiday rush for revenue, more orders means more chargebacks. November and December may be jolly, but January can be a huge headache for those who are not prepared. Check back here throughout the month for updated content detailing what merchants can do to more effectively handle the increase in chargebacks coming in the new year.]

Congratulations—you survived the crush of holiday sales! But now that the dust has settled and business is returning to normal, the post-holiday chargebacks are coming in.

Disputing chargebacks can be tedious and cumbersome, not to mention discouraging; the process doesn’t favor merchants, as banks and credit card companies require little proof on the part of the consumer to substantiate their claims.

Between the complexity of the chargeback process and the sheer volume of transactions and associated information that pour in during the holidays, mistakes are easy to make when challenging a chargeback. But they’re even easier to avoid by taking steps to prevent them in the first place.

Not communicating clearly with customers

Reduce the number of chargebacks due to lack of communication by adopting features that offer transparency. Provide regular updates about the status of an order, empower customers to see what’s happening in their accounts and optimize the payment process.

Making things clear for your customers increases their trust in your business and decreases the confusion surrounding purchases that often leads to chargebacks.

Lacking a paper trail

It’s a lot easier to fight chargebacks when you’re keeping detailed records of all transactions. Collect customer and purchase information and screenshot it—this will help prove that a customer actually purchased or received the item in question.

Use email correspondence and have copies of receipts and related paperwork; fighting a chargeback usually involves providing signed delivery slips, CVV slips and emails between your business and the card holder. Ensure your filing system is organized and allows easy, fast access to this information.

Not working with your credit card processor

Take advantage of the knowledge and experience your credit card processor has combating chargebacks. They’re also invested in you winning the fight, given that they stand to benefit from it as much as you do. So, work with them to make sure you have all the tools at your disposal to be successful.

Not checking whether the acquiring bank is involved

The acquiring bank—the financial institution that maintains the merchant’s bank account—often handles chargeback disputes, but many businesses don’t determine that before challenging a chargeback. Some chargebacks qualify for automatic representment, so it’s a good idea to check if the chargeback you’re disputing is already being handled by the acquirer.

Ignoring your metrics

Succeeding at scale will rely in part on tracking chargeback metrics. For example, having a chargeback rate in excess of 1 percent might indicate that your site is being used by fraudsters to test stolen credit cards or that account takeover is wreaking havoc on your customers.

Maintaining a chargeback rate of 1 percent or more means running the risk of being labeled a high-risk merchant by most credit card companies, and being enrolled in a chargeback monitoring program. Not only is this a bad look for your company, it can be a pricey punishment; Mastercard’s program requires the merchant to provide regular reports on their activity, with a charge of $300 to $500 for each report.

Chargebacks don’t have to be a nightmare. Staying organized, attentive, and thorough will help you keep track of all of the information you’ll need to effectively and successfully prevent and dispute chargebacks, during and long after the holiday rush.

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