While chargebacks may seem inevitable for online merchants, there are ways to reduce risk and stay prepared for these occurrences. Here are some important tips to remember:
- Every credit card processor has a protocol; your job is to abide by it. You may be required to gather additional information from the customer in order to process an online purchase (for example: obtaining the customer’s digital signature, IP address or social media information). All processors have different protocols. In order to follow a particular processor’s protocol, Mastercard and Visa offer another layer of security that requires customers to enter an additional password. Processors also demand proof of delivery so that they can manage the purchasing process safely and securely.
- Use clear payment descriptors. Payment descriptors appear on the customer’s credit card statement when they make a purchase from your business. These descriptors typically include the merchant’s name and a clear description of the product or service. Many chargeback disputes arise because of unclear payment descriptors. Your descriptors should reflect your business, not your parent company or an in-house code that your customers won’t recognize. If a customer sees a payment attached to an unrecognized descriptor, they’ll go straight to their bank and request a chargeback. At that point, you’re responsible for proving them wrong. Heeding this advice will save you a lot of time and money.
- Require a contract. An easy way to avoid chargebacks is to require each customer to sign a contract that details your company’s services. This will require more work upfront, but it lets the merchant bill the card for a certain amount. This makes it harder for a customer to dispute a correct charge, and the merchant can be fairly certain that a transaction is fraudulent if he or she receives a chargeback.