As a small business owner, nothing is more annoying than getting a phone call or letter from your credit card processor finding out that you have been hit by a chargeback. The cost can be a big hit to your bottom line because not only do you lose the money that was included in the transaction; you may face fees from your processor or bank too. While it may be impossible to avoid all credit card chargebacks, we’ve put together a short guide that may help you avoid some of the more common issues that lead to chargebacks—protecting your firm’s financial situation.
What is a Chargeback Anyway?
A chargeback occurs when a customer disputes the charge on his or her account. Customers can dispute charges if:
• A non-authorized user made the purchase
• They did not receive an item they ordered.
• He or she feels that a product or service was not as represented
• The customer was not billed correctly
• The client does not recognize the charge on the bank or card statement.
Tips to Avoid Chargebacks
Avoiding credit card chargebacks is easier than you may think. It all comes down to providing superior customer service. Here are a few tips that can help you avoid a chargeback.
1: Every time you process an order by credit, rather than debit, make sure you check the ID of the person using the card. Some customers may be annoyed, but you are protecting everyone from fraud.
2: Always provide a receipt and keep this information in your files too. That way if a customer does attempt to dispute a charge, you will have the information available to fight the dispute and potentially win the case.
3: Learn to spot the signs of fraud. If a card is rejected and a customer provides another, with a different name, that has the potential for fraud. In these cases, take EVERY precaution. Additionally, if your machine comes back asking you to call for authorization, make sure you take the time to do so. You could protect yourself and others from an unscrupulous identity thief.
4: Have a clearly defined return policy in place. In many cases, if a customer is not happy with a purchase and they can return the item instead of charging back, they will.
5: If you sell online, make sure you ship every item with tracking so that you can prove delivery. This can help you fight a chargeback for non-delivery.
6: Train your employees to follow protocol. Even if you are careful, all it takes is one simple mistake by an employee to cause a chargeback that could cost your company big money. Careful planning with credit card processing and financial matters, in general can prevent big mistakes.
When it comes down to it, avoiding chargebacks as a small business owner has a lot to do with opening the lines of communication between your firm and your customers and delivering top-notch customer service EVERY TIME. Do this, and you will be much less likely to deal with this annoyance. As a final note—make sure you keep extra funds in your primary bank account. That way if you do face a chargeback, you are less likely to take your account into the negative and have to deal with those repercussions too!