Chargebacks: 3 Cold Hard Facts

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Approaching chargebacks with a laissez-faire type of attitude can cause your merchant account provider to become concerned and close your account.


If you run an online business, odds are you’ve heard of chargebacks before. They’re an important part of any business operating online, making it crucial for merchants to understand what they are and how they occur. While too many chargebacks are a bad thing, experiencing a few is normal and just another part of the business.

But, approaching chargebacks with a laissez-faire type of attitude can be detrimental to your online payment processing capabilities. Having too many can cause your acquiring bank or merchant account provider to become concerned and close your account. Chargebacks also have a reputation to cost merchants a large sum of money in fees. So what can you do to keep your chargebacks in check? You just need to take a few simple facts into consideration.

1. Consumers Request Chargebacks Because Its Easy

You may not believe it, but some consumers out there actually request chargebacks because it’s easier than requesting a refund. Keep in mind, the chargeback process is no walk in the park, but customers may find the prospect of going straight to the source (their credit card issuer) an easier solution.

What can merchants do? Make sure your customers are aware of your return and refund policies. Clearly state them on your website and in purchase confirmation emails in case your customer is dissatisfied with the product, or if there is some problem during the shipping process. Let them know that requesting a refund through you is easy and efficient so they won’t be encouraged to contact their credit card issuer.

2. Some Chargeback Fraud is Accidental

Chargeback fraud, sometimes known as friendly fraud, is a problem for many merchants. Chargeback fraud involves someone exploiting the chargeback process to get away with free goods or extra cash. Since chargebacks are mostly relative to different types of businesses, it can be hard to fight back against chargeback fraud, presenting a real challenge for merchants.

However, some chargeback fraud is committed accidentally. As is the case with most chargebacks, many fraud cases are the result of simple miscommunication between consumer, merchant, and bank. If a consumer calls their credit card issuer to cancel a subscription or contact a merchant on their behalf, it can often be confused for a chargeback request. If a merchant isn’t properly prepared to counter a chargeback, it can technically be defined as fraud.

3. Merchants Don’t Have Time to Monitor Chargebacks

Being proactive in the fight to prevent chargebacks is important. As mentioned above, ignoring chargebacks as a merchant can actually put you in hot water with your acquiring bank, and you may even lose your credit card processing services. All card-not-present merchants must take the time to monitor their transaction activity and gather evidence in the event of a chargeback.

However, most merchants simply do not have the time to do this. Job duties can pile up, and few business owners have the motivation to scan transaction data in the event of a chargeback.

The solution? Look at options other than yourself. If you have employees on your payroll, use them—in the event of a chargeback, you’ll need to find evidence of the consumer’s purchase, shipping confirmations, and more to reverse the chargeback and avoid extravagant fines. You can also rely on a merchant services provider to gain valuable chargeback insights and advice from.

Understanding chargebacks is crucial to succeeding in the e-commerce world. It can be time-consuming, but with the current state of chargebacks and chargeback fraud, merchants need to understand the facts and be proactive in order to keep their payment processing capabilities afloat.

Nov 11, 2015 Category: General Posted by: Marketing
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In Chargebacks 101 for Merchants, Instabill teaches business owners about the chargeback process and chargeback reversal process. Instabill also offers advice on how to prevent chargebacks as well as credit card fraud.

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In Chargebacks 101 for Consumers, Instabill clearly identifies the similarities and differences between refunds and credit card chargebacks. Consumers can learn what situations are best for each type of transaction.

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Instabill is an Internet payment service provider with more than 12 years of credit card processing experience. Learn more about Instabill as well as why the company created the website

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