Accepting credit cards is a wonderful feature for businesses to offer their customers, but it does come with risks. One of those risks is the threat of a chargeback. A chargeback occurs when a customer disputes a transaction with their bank, which can result in the money being returned to the customer. This can happen by mistake, or it can be the result of something more sinister like fraud. Let’s dig a little deeper into what happens during a chargeback and how you can protect yourself.
How Do Chargebacks Affect Me?
While each bank has a slightly different process for handling chargebacks, they all take some time – sometimes up to several months – while the bank reviews the customer’s claim for legitimacy. During this time the funds are withheld from your business, which can be a major inconvenience. As soon as the customer notifies their bank that they have a dispute, the bank reaches out the merchant for some additional details about the transaction. The burden is on the merchant to prove that the transaction is not fraudulent, or the bank will refund the money to the customer. Here’s the kicker: the customer also gets to keep the product they purchased! This is certainly not a win for the merchant. The bank will ask all kinds of questions about the details of the purchase and the due diligence conducted to ensure the purchase was legitimate, and will use the information you provide to make your determination.
It’s important not to try to refund the customer on your own while the chargeback is being reviewed. If their chargeback claim is deemed legitimate, the customer will receive their money automatically at the end of the process. You will also be responsible for chargeback fees, regardless of whether or not the customer’s dispute is successful. These fees essentially compensate the bank’s chargeback department for their time spent researching and verifying the complaint. It’s best to just minimize the number of chargebacks you’re involved with in the first place.
How Can I Prevent Chargebacks?
The most important way to prevent chargebacks is to make sure you are following best practices for accepting and processing credit cards. This all begins with your processor, who should be educating you proactively about proper security protocols and fraud prevention strategies. If they’re not already providing you with these services, ask for them – they should be at no additional charge to you with any reputable processor. You can also protect yourself by training your staff to be alert to signs of fraud. Encourage them to trust their instincts and to request further identification from the customer or even contact the card company if they feel something is amiss. Your employees are your first line of defense against fraud. Make sure they have the tools they need to feel empowered to protect your business.
If you sell services rather than products, consider a detailed contract that explicitly lays out exactly what you will provide and how much it will cost. This will cut down on complaints from customers arguing that they did not receive the service they were promised since it will all be spelled out in black and white. Finally, exceptional customer service goes a long way toward helping customers feel safe and secure when shopping with you. Strive to cultivate an open, friendly environment so customers will feel comfortable coming to you to resolve a dispute rather than rushing right to their bank to initiate a formal chargeback proceeding. You may be able to resolve simple misunderstandings on your own without getting the bank involved.
Your Partner When Chargebacks Strike
At 360 Payments, we do everything possible to educate our merchants on how to protect themselves from chargebacks. Sometimes, however, even the most fastidious merchants have to deal with them. When that happens, you want a payments processor who takes your side and helps you fight the dispute every step of the way. We communicate early and often in plain English about the chargeback process and make sure you fully understand everything we’re doing to advocate for you. Give us a call at 1-855-360-0360 or drop us a line on our website – we’d love to show you how we do business.
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