After having worked with thousands of business owners, we have seen many of them leave thousands of dollars on the table every single year.
Here’s the crazy part…
… They do not need more leads or to close more sales to add hundreds of thousands of dollars to their bottom lines.
Instead, all they need to do is learn to correctly fight a chargeback to collect what is rightfully theirs. Maybe you’re thinking, what is a chargeback? Don’t worry, we have your back!
What is a chargeback and what is the best way to fight it?
It is important to understand a chargeback is when a cardholder disputes a transaction on their statement they don’t recognize or was charged incorrectly. It’s a forceful return of a transaction of the cardholder’s funds from the issuing bank. Once the business receives notice of the chargeback they must respond with proof of the transaction within 7-10 business days to win or challenge. Proof must be sufficient as per the processor’s standards in order to get a favorable decision.
Here’s where chargebacks get tricky…
… If a cardholder disputes a transaction with their bank, it’s left up to the business to prove the transaction was legitimate.
It’s important to know this process as it can potentially cost you a lot of money if you lose or mishandle the chargeback process. If you lose the chargeback, there is no recourse and it hurts your payment processing relationship. Most businesses receive chargebacks because they are not set up properly or they do not respond in time amongst other valid reasons.
Here are seven reasons why your business could lose a chargeback and why we recommend fighting it.
1. Review your processor’s protocol on chargebacks.
Before you fight a chargeback it’s important to look at the terms and conditions on your invoices, forms, and website.
Contact your processor; ask for their standards and protocol so you can incorporate them in your existing terms.
Once incorporated, ensure they are followed.
Every credit card processor has its own protocol when it comes to accepting credit cards, when you abide by them it helps you win chargebacks.
On top of the above, you should design an “internal chargeback protocol”, which helps your business detect signs of fraud. Pay attention to alerts, suspicious details or information that doesn’t match up.
2. Ensure you get all communication in writing and maintain good documentation throughout the sale.
It’s best practice to handle all communication via email so you have good documentation of correspondence.
One of the most important factors is to require customers to sign a contract, which spells out the specific products or services the company will provide.
You must also get a cardholder signature on this contract so you have authorization in writing.
At the very least, you must maintain accurate records of customers’ transaction amounts, dates, and authorization information. Your business will need this when fighting a chargeback.
In addition to the above if your business has: signed receipts, cardholder communication regarding the transaction, delivery or pickup notification, IP addresses (if online), copy of the cardholder’s identification presented for the pick-up, cardholder’s signature on a pick-up or equivalent form, proof the cardholder has possession of the goods and/or emails/photographs that cardholder received goods, it will help the strength of your case to win the chargeback.
Have your information readily available either electronically or in files in case a chargeback arises.
3. It’s important to respond quickly to the processor’s chargeback notifications.
An effective strategy is to prepare a chargeback response template ahead of time.
All the standard information will be outlined and any case-specific information will be updated accordingly.
Once you receive the chargeback, use this system to submit as soon as possible.
Standard information includes: your terms and conditions, return policy, delivery schedule and other forms that are part of your sales process.
This strategy will save you from having to rebuild this process every time you receive a chargeback.
Chargeback disputes are reviewed by several individuals at your bank, it is important that you present clear and precise evidence to support the claim.
Take note of all deadlines outlined. Ensure the deadlines are monitored and met.
4. Review the chargeback reason code presented.
A chargeback notification will include a “reason code” used to identify the chargeback, which corresponds to an exact reason why this chargeback has occurred (e.g. Merchandise not received).
Understanding a chargeback’s reason code is essential when preparing an effective chargeback dispute case.
Only certain evidence may be required so it’s important to provide only that information.
5. Using a clear descriptor is important for cardholders.
The descriptor identifies the charges that appear on a cardholder’s statement. Confusing descriptors are a common cause of chargebacks. Use a clear descriptor to eliminate confusion, which can avoid a chargeback dispute.
6. It’s very important to handle customer complaints promptly.
Chargebacks most commonly begin when the cardholder feels as if they are unable to recover their funds through a company’s customer service department.
The business must clearly display customer support contact information along with the refund policy.
Proactive and effective customer service is instrumental in handling chargebacks or preventing them altogether.
Ensure your refund policy is clear and is customer friendly.
Your business must provide a detailed description of what you’re selling. Include pictures, screenshots, dimensions, features, functionality, and verbiage of the product description.
Here are a few customer claims that commonly happen for awareness.
Customer states regarding your product or service:
- You never delivered the product/service
- You shipped and something was broken
- The customer never ordered it
- A refund/return was issued but the funds never got refunded
Here are some tips to prevent the above from happening:
- Use a credible delivery service that uses a notification service. This is important for backup purposes.
- Obtain a signature, as it’s always important to prove to the processor that the package was marked as delivered.
- To prevent broken merchandise claims, ensure shipping insurance is purchased.
- If the goods are damaged, have the customer ship back the product with a claim.
- Make sure to have clear documentation of their order.
- Use discretion when shipping merchandise to an address other than the billing address noted on the credit card.
- If the customer made a return then ask for a confirmation number, if the customer cannot produce one then the credit card company won’t issue a chargeback.
- Ensure any large order with rush delivery to a different billing address is analyzed with scrutiny.
- Document the timeframes with which to handle these claims. If you note you’re going to give a refund, ensure the money is returned as quickly as possible.
- If a cardholder expresses dissatisfaction, the cardholder will get in touch with them quickly to try to solve the issue.
- Always have your company available to address cardholder concerns.
- Ensure you keep your promises as a company and you perform the right due-diligence on your cardholder’s purchases.
- If in doubt, contact the customer and ask them a checklist of questions to ensure it’s the right person, they are aware of what their ordering, etc.
- If the order is large in size, research the customer.
7. Train your employees on fraud and chargebacks.
It’s a good idea to train employees thoroughly on how to deal with both card-present and card-not-present transactions. Good training includes teaching them fraud and chargeback prevention techniques, such as looking for suspicious transactions, verifying signatures in card-present transactions, and obtaining signatures on contracts and sales orders when appropriate.
Now you know 7 ways to fight a chargeback which can be an expensive and time-consuming process. It is time for you to establish a reasonable, well-organized chargeback procedure. If you think the process is too much to handle on your own, call 1.888.668.0733 or email: firstname.lastname@example.org and we’ll fight on your behalf.