how do you protect merchants from chargebacks

^{Six Ways Merchants Can Prevent, Reduce and Manage Chargebacks}

1. Prevent common merchant errors. Preventing errors and eliminating confusion that cause customers to dispute charges is among the easiest ways to stop chargebacks.
2. Create customer-friendly exchange and refund policies. If a customer is unhappy with the product or service they received, they may simply dispute the purchase with the issuer rather than ...
3. Strengthen cardholder verification and authentication processes. True card fraud—when someone steals a payment card number and uses it to make purchases either online or in person—is another common reason ...
Give customers more detailed transaction information. A fast-growing cause of chargebacks is friendly fraud —when customers wrongfully dispute legitimate charges that they or someone else in their household made.
Use collaborative tools. By the time merchants get a chargeback, weeks or months may have passed, and it’s too late to stop the fraud or resolve the dispute with ...
Implement a chargeback management system. Many tech solutions, such as chargeback management software platforms, are often marketed as a “one-stop” way to reduce and manage chargebacks.

Full Answer

What is chargeback prevention?

What is a Chargeback?

What is the purpose of records of your interactions with customers?

Is Paykings a high risk merchant?

Can chargebacks cause problems?

How can merchant chargebacks be avoided?

How Can Merchants Prevent E-commerce Chargebacks?Follow payment processing protocols.Use a recognizable merchant descriptor.Offer available and helpful customer service.Use effective fraud prevention.Maintain complete records for representment.Set realistic expectations with your customers.Use tools to deflect disputes.

How do merchants fight chargebacks?

If the cardholder issues a chargeback, the merchant can dispute it and ask for the transaction to be submitted to the bank a second time – this is called 'representment. ' The merchant can ask the bank to cancel the chargeback and charge the cardholder again.

Are merchants liable for chargebacks?

Who is liable for chargebacks? Merchants are liable for chargebacks in most cases and bear the burden of proof in any dispute. A merchant must make their case for why a chargeback should be reversed. If no action is taken by the merchant, the cardholder wins by default.

How do you mitigate a chargeback risk?

Chargeback Mitigation: 5 Best Practices to Reduce FraudVelocity checks. ... Enable 3DS-only transactions. ... Third-Party Risk Engines. ... Address Verification System (AVS) ... Alternative Payment Methods for foreign countries.

Do merchants lose money on chargebacks?

Chargeback Costs & Consequences: Merchants Even if the chargeback is later canceled, the merchant will still have to pay fees and administrative costs. If the consumer files a chargeback and simply keeps the merchandise, the merchant loses that revenue and any future potential profit.

What happens to the merchant if you dispute a charge?

The merchant is simultaneously notified that they've received a dispute from the cardholders, and that the acquiring bank has debited funds from the merchant account to reimburse the cardholder for the transaction and to cover the fees for investigating the chargeback.

Can a merchant win a chargeback dispute?

To win a chargeback dispute as a merchant, you must have evidence that is compelling enough to persuade the cardholder's bank to reevaluate the case. Depending on the reason for the chargeback, your evidence needs to prove you: verified the identity of the shopper. processed the transaction correctly.

Why do merchants hate chargebacks?

Chargebacks are considered a Cost of Doing Business Based on that, plenty of merchants view chargebacks as they would a tax or a churn rate, writing off disputes and filing it under cost of goods sold (COGS).

Do customers always win chargebacks?

A chargeback, or a reversal of a charge because of a dispute, can protect consumers not only from errors and fraud, but also from poor quality products and services. Chargebacks are easy to initiate and are often successful, but they don't cover all scenarios.

What is the risk of chargebacks?

Chargebacks can cost businesses both the purchase amount as well as additional fees. Banks and card networks may also penalize you if your chargeback ratio (the percentage of chargebacks of your transactions) becomes too high. Preventing chargebacks is more important than defending them.

How do you handle a chargeback in accounting?

If you fight the chargeback and win, you can clear the chargeback off the books by crediting cash and debiting Accounts Receivable. If the chargeback reaches the endpoint of the dispute process and is upheld (or if you choose not to fight it at all), you can write it off by adding it to a bad debts expense account.

What is a chargeback reduction plan?

What Is a Chargeback Reduction Plan? A chargeback reduction plan is a formal document requested by a card network (or an acquirer acting on their behalf) as part of a chargeback mitigation program. It outlines a merchant's plan to reduce the number of chargebacks they receive.

Do chargebacks hurt merchants?

Yes. In addition to the cost of the refund to the consumer, you’ll incur restocking and chargeback investigation fees. Dealing with chargebacks als...

Can you fight a chargeback?

Yes. Merchants can and should respond vigorously to any chargebacks they feel are fraudulent. At the same time, if you know that the error was on y...

How many days does a merchant have to dispute a chargeback?

Each credit card association has its own rules for responding to chargebacks, but merchants generally have 45 days from when the chargeback was fil...

How do you win a chargeback?

There is no foolproof way to always prevail in a chargeback investigation. However, submitting a clear, legible receipt and any other relevant docu...

Do customers always win chargebacks?

No. However, chargeback policies are designed primarily to protect consumers, not merchants. Customers generally win around 80% of all chargeback i...

7 Ways to Prevent Chargebacks and Guarantee Payments

By Andres Suay of Trustly If you accept credit card payments, chargebacks are inevitable. They are also time-consuming to dispute and too expensive to ignore, costing as much as $20 to $100 in fees per transaction. Receive too many chargeback complaints, and your business could be marked "high risk" and charged higher credit and debit card processing fees.

How To Prevent Credit Card Chargebacks: 12 Essential Tactics

Why Small Businesses Need To Prevent Chargebacks. You already know that a chargeback is when a customer bypasses you and goes directly to their issuing bank to get their money back when they’re dissatisfied with a purchase. Chargebacks can also be initiated when there’s been a clerical error, such as accidentally double-charging for a purchase.

How to Protect Yourself From Chargeback Fraud [Top Hacks]

The Ins and Outs of Chargeback Fraud Protection. Much like its name says, a chargeback is a reversal of a credit card payment that comes directly from the user’s bank. It acts as a safety net protecting the customer from dishonest merchants.

What makes a good chargeback management company?

A good chargeback management company will have the experience, resources, and 24/7 availability to fight chargebacks more effectively than most small businesses can on their own.

How to make a chargeback go away?

In most cases, you can make the chargeback go away by refunding the customer. You lose the sale, but the chargeback won't be counted against you by your bank, so you won't risk getting higher fees or losing your merchant account due to excessive chargebacks. To combat stolen card fraud, you can use tools like 3-D Secure.

How long does a company have to dispute a chargeback?

Depending on the card network, as few as 20 days and as many as 45 days from the initial date of the chargeback.

What causes chargebacks?

Common causes of chargebacks include unclear merchant descriptors, poor customer service, and insufficient fraud prevention methods.

What is chargeback alert?

Chargeback alerts, offered by companies like Ethoca and Verifi (as well as chargeback management companies, who may bundle alerts from both services), provide an early warning system for chargebacks that gives you a chance to respond to them before they reach the banks' attention.

Why are chargebacks so bad?

The reason chargebacks are so damaging is because they cost far more than just the transaction amount they reverse. When you add in the bank fees, overhead, and other associated costs, the true cost of a chargeback can be up to two and a half times the original amount.

What are the different types of chargebacks?

There are various types of chargebacks to watch out for: 1 True fraud chargebacks, against fraudulent or improper charges that the customer should not be held responsible for 2 "Friendly fraud" chargebacks, initiated by the customer against legitimate charges 3 Merchant error chargebacks, where payments were processed incorrectly

Why is it important to prevent chargebacks?

Because of their potential impact on your business, learning how to prevent chargebacks – and how to deal with them when they happen – is very important. For most merchants, chargebacks will only be an occasional irritant. For others, a high chargeback rate can lead to your business being classified as a high-risk merchant or even having your merchant account frozen or shut down.

Why are chargebacks important?

Chargeback rules encourage merchants to be honest and have fair return policies. They also discourage merchants from selling substandard goods or services. This is particularly important as more and more commerce is conducted online, where the consumer doesn’t have the opportunity to inspect goods physically before making a purchasing decision.

What happens if a customer isn't happy with the transaction?

If the customer isn’t happy with how the transaction turned out, they might request a chargeback without contacting you first. Customers can be dissatisfied for any number of reasons. Here are some of the more common ones:

How much does a chargeback cost?

You usually won’t get this fee back, even if you prevail in the chargeback investigation. Chargeback fees usually cost $15 – $25 per incident , regardless of the size of the transaction. All providers will levy a chargeback fee, although some charge less than the industry average, and a few will even refund your chargeback fee if you prevail in the investigation.

What is chargeback in banking?

At its most basic, a chargeback is a reversal of funds transferred from the consumer to the merchant. In other words, your customer “takes back” the payment they’ve made to you. Chargebacks are performed by the bank that issued the customer’s credit or debit card, but they’re initiated upon a request from the customer.

What is the first step in fighting a chargeback?

Ensure your sales receipts are complete and legible so that they can be clearly understood by the consumer as well as act as a valid piece of proof during a chargeback dispute. A clean receipt should be the first step in fighting a chargeback.

What is a chargeback for not receiving a product?

A chargeback for “services not provided/merchandise not received” can be corrected with shipping details, carrier confirmation, and evidence of delivery, such as a signed delivery receipt. This is often referred to as “proof of delivery.” If the shipping timeframe has not yet passed, and you have clearly stated on your website or receipt to allow a specified number of days for shipping, presenting that information to the investigating bank can stop the chargeback.

How to manage merchant chargebacks?

There are two critical components to managing merchant chargebacks: prevention and representment. Starting with chargeback prevention, there are two pathways merchants can take in an attempt to decrease cases: outsource the job to professionals, or try to handle things in-house, usually with existing staff.

What causes chargebacks?

Most merchants are surprised to discover that despite the range of available reason codes, all chargebacks are caused by one of three things: merchant error, criminal fraud, or friendly fraud.

Why Do Chargebacks Happen?

Most merchants are surprised to discover that despite the range of available reason codes, all merchant chargebacks are caused by one of three things: merchant error, criminal fraud, or friendly fraud.

What is Chargebacks911?

The Chargebacks911 Merchant Compliance Review helps find and eliminate merchant missteps that commonly lead to transaction disputes. This proprietary solution includes an unbiased analysis of the merchant’s policies and procedures, plus expert assistance in implementing a preventative action plan.

What is the second component of merchant chargebacks?

The second component to combating merchant chargebacks is representment . Representment is the only way to recover funds that the merchant never should have lost in the first place. When done correctly, representment actually helps prevent future chargebacks.

Do merchants keep chargeback representation in-house?

Many merchants prefer to keep chargeback representment in-house. They feel this option gives them greater control and requires less of an investment. On the surface, this may appear to be true, but in most situations, there are downsides of which the merchant isn’t aware:

Does Chargebacks911 provide the widest combined chargeback alert coverage?

Not only does Chargebacks911 provide the widest combined chargeback alert coverage, we’re Visa-authorized VMPI facilitators. Combining these two important services offers merchants ample opportunities to intervene and prevent issues from becoming chargebacks.

How to prevent chargebacks?

Your prevention plan: Although there’s no guaranteed way to prevent chargebacks, there are some proactive steps you can take to help: 1 On the document where the total price is listed — whether that’s an invoice, a contract, or an email — make sure to accurately describe in detail the goods or services offered. This can reduce any potential for confusion or misunderstanding. Make sure you review this description with your customer. 2 Prior to delivery or beginning work, get your customer’s signature (electronically or in writing) acknowledging this description of the goods or services, along with your terms and conditions. 3 Provide your customer with tracking information including the carrier, expected delivery date, and tracking number for all goods requiring shipping and handling. 4 Obtain your customer’s signature after goods and services are rendered or delivered, acknowledging that the services or goods have been rendered or delivered as described. 5 Be available for your customer should they have any questions or concerns regarding the goods or services.

What is chargeback dispute?

A chargeback, or dispute, is something that your customers can initiate when they are unhappy with a credit card payment you processed. You may disagree with your customer, but in most cases, the bank will open a formal dispute on your customer’s behalf. The process can feel unfair or frustrating, but we are here to help you navigate through it.

What is a document that demonstrates that the cardholder acknowledged merchandise delivered or services rendered as described?

Documentation (e.g., signed contract, invoice, bill of lading, etc.) or photographic evidence illustrating that the cardholder acknowledged merchandise delivered or services rendered as described.

What is the best defense in a dispute?

Your best defense in a dispute: You should provide specific and concrete evidence to prove that your cancellation and/or refund policy was clearly stated at the time of the transaction and acknowledged by your customer.

How to respond to a card issuer?

Your response plan: Your first step is to reach out to your customer. See if you are able to understand the reason for their complaint and resolve the situation. If you can’t figure it out, card issuers consider the following compelling evidence for challenging the dispute:

What information do you need to provide a customer with tracking?

Provide your customer with tracking information including the carrier, expected delivery date, and tracking number for all goods requiring shipping and handling.

What is a customer complaint?

Customer complaint: Cancelled the order of goods or services.# N#Your prevention plan: Order cancellations are a part of doing business, but to make sure that they don’t cause you or your customers problems, you should:

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Summary

For a consumer, a chargeback means that something with their purchase has gone haywire. For a merchant, it presents the possibility they won’t get paid – and might be out merchandise or services, too. Here are seven tips merchants can use to pull a “win” out of a chargeback.

2. Look for patterns in your chargebacks

The best way to win a chargeback is not to have one in the first place. Think of this as the business equivalent of plugging a leak.

3. Make the most of tech

Card networks, card processors and acquiring banks have myriad tools available for merchants to help prevent chargebacks, and merchants “should make sure they are leveraging all of the fraud prevention services provided by their acquirer and network,” says Scott DeBoard, vice president of the Discover Global Network.

4. Make buying easy and explicit

Card experts and business gurus praise transparency. What they’re really saying is to let the customer know exactly what to expect before, during and after the transaction.

5. Pick your battles

You don’t want a reputation for going to war with your own customers. Conversely, “goodwill is something of incredible value,” says Ira Rheingold, executive director of the National Association of Consumer Advocates.

6. Play by the rules

Card banks and networks offer consumers the option of chargebacks, and if you accept payment with those cards, you want to make sure all of your store policies dovetail with card issuer policies.

What is chargeback in shopping?

Here, the system is as follows: the scammer makes a payment in an online store with someone else’s card, or uses his own card, but after receiving the goods, contacts the bank or even the merchant directly – and claims that the purchase was made without his knowledge or consent.

What is the first rule for online merchants?

The main and first rule for online merchants: It is always important to fulfill your obligations to the client when it comes to the product, terms of delivery, particular service and any extras.

What happens when a client cancels a transaction?

This is an unpleasant transaction for all involved, because the merchant suffers a loss, receives a negative rating, and the client remains dissatisfied and could afterwards potentially contribute negative feedback about the merchant’s business on the web.

What is chargeback prevention?

Chargeback prevention for merchants is essential for eCommerce companies. If you are looking for strategies to prevent credit card chargebacks, this article provides helpful steps to help. And if you don’t already know, you’ll need to understand how to get approved for a high risk merchant account quickly and easily.

What is a Chargeback?

A chargeback is an alternative for customers to receive their money back in the case that they find fraudulent transactions on their credit card statements.

What is the purpose of records of your interactions with customers?

7. Records of Your Interactions With Customers: Records of your interactions with customers will allow you to solve fraudulent disputes.

Is Paykings a high risk merchant?

Choosing the most reliable high risk merchant account from a reputable high risk payment processor, like PayKings, is critical to your business’s longevity and long-term success. Retailers that are categorized as high risk merchants need to be aware of the hurdles they might face on their journey to securing a payment processing company.

Can chargebacks cause problems?

It is true that chargebacks can cause problems for your industry as a whole. But with the right combination of chargeback prevention, high-quality customer service, and solid business practices, you can successfully battle and mitigate chargebacks.

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Third-Party Chargeback Protection Tools

• Another way to protect your business from chargebacks is to use tools and services from third parties that are designed to prevent chargebacks. Chargeback alerts, offered by companies like Ethoca and Verifi(as well as through chargeback management companies, who may bundle alerts from both services), provide an early warning system for chargebacks ...

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