With costs totalling up to $40 billion per year, there’s no question that merchants need to avoid chargebacks as much as possible. It has been estimated for a $100 chargeback, merchants end up paying an average of $308 once fees, penalties and product costs are factored in.
With that said, chargebacks often have a few common causes and taking simple steps like improving customer service and preventing fraudulent transactions can significantly reduce chargebacks.
Here are 5 ways to reduce chargebacks for your online business.
1. Be Upfront
Communicate with customers so they fully understand your product, costs and all other processes that might be involved at the time of purchase. When initiating a chargeback with their credit card company, over 86% of customers don’t contact the merchant beforehand. Therefore, providing customers with information of what to expect on their credit card bill upfront is critical. The same name that your company uses to do business and that your customers identify with should appear in the credit card soft descriptor.
2. Keep Communicating
After a transaction, promptly send a receipt to your customer detailing what they purchased, the price and how to contact you. If you are a subscription company and charge recurring fees, keep your company and service top-of-mind with consistent ongoing communication.
3. Respond Quickly to Requests
If an issue does arise, a readily available and knowledgeable customer service team can go a long way towards reducing chargebacks. Aim to have issues resolved as quickly as possible whether it’s trouble with onboarding or simply reminding customers what they (or their spouse) bought.
It’s important to make it easier for customers to contact you first instead of their credit card company. Clearly communicate how to get in touch with your customer service team and give customers a number of options like a phone number, email address or a chat function on your website.
4. Make Refunds Easy
While this is not the ideal outcome, if a customer still isn’t satisfied with your product, make returns and refunds as easy as possible. Whether it’s through your customer service team or a self-serve function through your website, refunds are simply much less costly than chargebacks.
5. Prevent Fraudulent Transactions
With advances in technology, credit card fraud is increasingly taking place online through card-not-present transactions. However, there are measures you can take as an online merchant to avoid transactions that have potential to be fraudulent.
Common methods include using a professional anti-fraud service, checking customer addresses, names and phone numbers with the card-issuing bank and following the extra verification and security steps recommended by credit card companies themselves.
Chargebacks come at a huge cost to merchants and their customer service. By incorporating these preventative measures, you can help mitigate the high cost of chargebacks and increase your customers’ satisfaction with your product and brand.
