Visa Mastercard Discover Amex

How to Avoid Chargebacks

A chargeback occurs when a customer contacts their credit card issuing bank to initiate a refund for a purchase they made on their credit card. The reasons why chargebacks arise can vary greatly, but generally they are the result of either a customer not having received or simply being dissatisfied with their purchase.

The customer may or may not have contacted the merchant about remedying this situation ahead of time. They may even be completely wrong. However, responsibility falls to the seller to ensure that the transaction goes smoothly and the customer is satisfied. A failure somewhere within the fulfillment process, including at the customer service level, can lead to a chargeback. Follow the advice in the following top ten list to help you reduce and eliminate chargebacks.

  1. Set Realistic Expectations
    • Display shipping information and product delivery times prominently.
    • Send parcels registered and insured so that there is tracking information and proof of delivery.
    • For direct sales or affiliate marketing, highlight the opportunities for new distributors but be careful NOT to make any promises. Call new members and find out subtly what they just bought into.
  2. Refunds, Refunds, Refunds
    • Give your refund policy prominent visibility on your website.
    • Carefully word your refund policy to encourage refunds instead of chargebacks - refunds cost you much less than chargebacks!
  3. Be Reachable
    • Make sure your contact information is highly visible.
    • Make sure there is someone to speak with during the times posted; frustrated customers will immediately call their credit card company if they can't get in touch with you easily.
  4. Use a Clear and Concise DBA (Doing Business As) Name That Will Appear on Customer Credit Card Statements
    • The name of your business that appears next to the charged amount on the customer's credit card statement is important. If it's clear, your customers won't need to call their credit card company to explain the charge.
    • Do not use a vague name or even worse a numerical business ID that may confuse the purchaser.
    • If possible, have your phone number listed next to your DBA, so customers can call you directly instead of their issuing bank.
  5. Make it Simple to Check Shipment or Order Status
    • Make it simple for customers to check the status of their order by logging into their account.
    • For direct sales, consider an "opt in" billing system for new members during their first couple of months, and make it as easy as possible to get out of a program, as it was to get in.
  6. Ship the Order First, and THEN Charge the Credit Card
    • Only charge the purchaser's credit card once the order is shipped. A long delay between order and shipment may cause customer suspicion, resulting in a chargeback.
    • In the case of back-ordered shipments, you will minimize customers asking for refunds which will save you both time and money.
  7. Collect and Store all Documentation for Fighting Chargebacks
    • Keep hard copies of all invoices, contracts, delivery receipts, user IDs and shipping logs.
  8. Only Accept Credit Cards Belonging to the Purchaser
    • Only accept transactions from the original cardholder, shipped to the cardholder's address on record. See Address Verification System (AVS).
    • If you choose to accept payment with a third person's card, make sure you speak to the original cardholder or get a faxed copy of their ID.
  9. Don't Let the Same Credit Card Make Multiple Purchases in a Short Time Period
    • Be sure the "buy now" button can only be pressed once for each order.
    • Set fraud parameters to limit cards to an acceptable number of purchases per fixed timeframe.
  10. When Possible, Perform Cardholder Authentication Checks
    • Use Verified by Visa and MasterCard SecureCode to protect yourself from receiving unwarranted chargebacks.

BONUS TIPS: Accountability Starts From the Bottom Up...

  • Keep your eyes constantly peeled for fraud by conducting regular audits on all transactions.
  • Train your employees to recognize irregular or suspicious transactions.
  • Be cautious of irregular or large purchase amounts, and in the case of direct sales, with large migrations into your program - investigate them carefully.
  • For direct sales or affiliate marketing, make sure your down-line is not misrepresenting your company or your company's message.
  • Keep an eye out for patterns of chargebacks and complaints stemming from particular distributors.

Need more information on how to reduce and avoid chargebacks? Contact one of our specialists at today or click here.