Too many credit card chargebacks won’t only cause a loss in your businesses’ profits, but may also negatively impact your merchant account and payment processing services with credit card companies. When selling online, or what we all know as eCommerce, you must be constantly sure that you are aware of credit card chargebacks and how to prevent them or protect your merchant accounts when they happen.
Running your own business can be extremely rewarding, but success also comes with careful planning and consideration, particularly with how you manage your merchant services. Since eCommerce is a largely card-not-present market, keeping your merchant account open and processing is tantamount for profit. One of the biggest eCommerce merchants opposes when trying to maintain their merchant accounts are credit card chargebacks.
If you don’t have the correct merchant payment processing services in place, too many chargebacks could lead to your merchant account getting frozen. Below we have assembled a short guide about what chargebacks are, how they happen, and how you can reduce their incidence.
What is a Credit Card Chargeback?
A credit card chargeback is also known as a disputed transaction. To put it simply, it’s any charge a consumer disputes on his or her credit card. The merchant needs to reverse the transaction to refund the money when a claim is filed.
Essentially, chargebacks are made to safeguard the shopper from credit card fraud. A customer can dispute a charge with their credit card company rather than arguing with the seller on the validity of a trade.
What Causes Chargebacks?
There are many reasons customers file for chargebacks and understanding them can allow you to avoid chargebacks and even to fight them back.
Here are some common causes:
- Friendly Fraud
Friendly fraud or chargeback fraud occurs when a customers use chargebacks carelessly which in turn can cause your business a huge financial loss. It happens when the customer enjoys the product or service then chooses to file a claim against you (a fraudulent claim) such as they didn’t receive everything they ordered.
Many dishonest buyers will commonly file for fraudulent chargebacks on legitimate and accurate eCommerce orders. Merchant beware of these potential buyers.
- Technical Errors
Human Error — Like in everything, people tend to make mistakes. If an employee is manually processing the transaction, or handling the order in any way, there is a risk of a serious error that would cause a customer to dispute a charge. To avoid chargebacks due to human error, make sure the credit card transactions are not entered manually.
Duplicate charge — Sometimes, due to errors in the system, a customer’s credit card may be charged twice for one transaction. A duplicate fee is also plausible if the client hits the PAY button too many times causing a duplicate order. To prevent this, ensure your eCommerce platform has fail-safes to prevent duplicate charges.
- Late or Delayed Shipments
Failure to send items on time or at all may prompt a client file a chargeback and to dispute a transaction. That is the reason you must ship the product a customer buys within the time frame, maintain receipts, and be certain to track whatever item you send. When selling through eCommerce, be sure you have fulfillment and logistics solutions.
- Unauthorized Email or Phone Orders
Clients may deny making a purchase via mail or telephone. If you handle email or phone orders, always request as many identification particulars as you can — especially the address of the customer and CVV of their credit card to sidestep a chargeback dispute.
- Expired/Invalid Accounts or Credit Card Numbers
If your system is not configured to reject any expired or invalid cards, then you could be accountable for a load of chargebacks. Select a payment gateway and a merchant account that can automatically reject unverified and expired cards.
The above is by far the most common causes of credit card chargebacks. Most of them are issues that only need a small amount of attention and planning. But if you start right away, you can significantly reduce the number of chargebacks your eCommerce shop sees, and do everything you can to keep your merchant account and payment processing services in place.