A business’s guide to avoiding chargebacks and credit disputes

Chargebacks and credit disputes are common problems for businesses that accept credit card payments. A chargeback is a payment reversal initiated by a customer when they dispute a transaction or return an item. It differs from a credit dispute when the cardholder questions the transaction and asks their card-issuing bank to investigate.

Chargebacks and credit disputes can be costly for businesses, so avoiding them is essential. Not only can they result in lost revenue, but they can also damage a business’s reputation and lead to increased processing fees. Additionally, a high rate of chargebacks can lead to increased scrutiny from the card networks and even the termination of a merchant account.

One of the best ways to avoid chargebacks and credit disputes is to use merchant chargeback protection services. These services can help businesses detect and prevent fraudulent transactions and provide support in a dispute.

Read on to learn how to avoid chargebacks and credit disputes with these helpful tips.

1. Communicate your return and refund policy

One of the most important steps a business can take to avoid chargebacks and credit disputes is communicating your return and refund policy to customers. A clear and visible policy can help prevent dissatisfaction and misunderstandings, which are significant causes of chargebacks and disputes.

Customers need to know what to expect when they purchase, and a clear policy can help them make an informed decision. A clear policy can also help you avoid disputes and chargebacks by giving customers a clear understanding of what’s expected of them.

Best practices for communicating your policy to customers include:

• Prominently displaying the policy on your website, store, and receipts
• Making sure that the policy is in plain language and easy to understand
• Providing a copy of the policy to customers upon request
• Emphasizing the policy during the sales process so that customers are aware of it before they make a purchase
• Ensuring all staff members are familiar with the policy and can answer customers’ questions

2. Obtain authorization for credit card transactions

Obtaining authorization for credit card transactions is crucial in preventing chargebacks and credit disputes. It’s verifying that the credit card used for a transaction is valid and that the cardholder has sufficient funds to complete the purchase.

By verifying the validity of a credit card, you can prevent fraudulent transactions, which are a significant cause of chargebacks and disputes. Additionally, confirming that the cardholder has sufficient funds can help you prevent transactions from being declined, which can lead to customer dissatisfaction and disputes.

Some tools and techniques for obtaining authorization include:

• Address Verification System (AVS): AVS requires the comparison of the billing address provided by the customer and the address on file of the credit card issuer.
• Card Verification Value (CVV): It is a three- or four-digit code on the back of credit cards. It’s used to ensure that the purchaser has a physical credit card.
• 3D Secure: 3D Secure is a security protocol that requires customers to verify their identity with their card issuer during an online transaction.
• Point-of-Sale (POS) Terminal: POS terminals are devices businesses use to process credit card transactions. They’re equipped with software that verifies the validity of a credit card and the cardholder’s funds.

3. Address customer complaints promptly

Addressing customer complaints is another crucial step in preventing chargebacks and credit disputes. When a customer has a problem with a product or service, you must quickly respond to resolve the issue before it escalates into a chargeback.

That said, here are some best practices for resolving customer complaints and preventing chargebacks:

• Establish clear and easy-to-find contact information for customer service.
• Provide a straightforward and easy-to-use process for customers to file complaints.
• Respond promptly to all customer complaints, regardless of their nature.
• Provide timely updates to customers on the status of their complaints.
• Provide a straightforward and fair resolution to customer complaints.

4. Send clear and detailed receipts

Providing detailed receipts is crucial in avoiding chargebacks and credit disputes. A clear and informative receipt can serve as proof of purchase and help resolve any disputes. It’s essential to ensure that all necessary information is included on the receipt, such as the date of purchase, the items purchased, and the total cost.

That said, here are a few practices for creating clear and informative receipts:

• Include all necessary information: The receipt should list the date of purchase, the items purchased, and the total cost. It should also include the customer’s name and contact information, as well as the business’s name and contact information.
• Provide a summary of the purchase: The receipt should include a summary of the purchase, such as the total cost and any applicable taxes or fees.
• Provide multiple copies: It’s a good practice to give the customer copies of the receipt, so they can keep one for their records and have one on hand in case of a dispute.

Conclusion

Chargebacks and credit disputes are inevitable, but by following best practices and utilizing the tools and techniques discussed above, you can significantly reduce their risk and the negative impact it could have on your business.

20/01/2023