No matter how smooth your business operates, sooner or later you’re going to get hit with a chargeback. Maybe someone will be trying to commit friendly fraud, maybe the post office will damage a shipment you send out to a customer, maybe someone will just file for a chargeback because refunds can take too long. Who knows. There are a lot of different reasons you might get hit with a chargeback, so you need to handle chargebacks.
There are a few basic steps that you can take to reduce the likelihood of chargebacks and to deal with them effectively when they do happen.
1. Try Not To Get Chargebacks
The very best way to deal with chargebacks is not to get chargebacks in the first place, right?
But how do you pull that off? Well, there’s no way to guarantee that you don’t get any chargebacks, but there are some things that you can do to make it a little less likely. There will always be customers who will go right to chargebacks when they’re not happy with the transaction, there will always be friendly fraudsters, but there are a few tactics that you can employ to ensure that your best customers don’t wind up jaded and swearing never to do business with you ever again.
Most importantly, you have to make sure that it’s easy for customers to ask for a refund. Make it a headache-free process, put the “request a refund” button someone obvious on your website, train your employees not to create any friction or resistance when a customer comes into the store and asks for their money back. Obviously, you should do this within reason. If you’re selling hot dogs, you’re not going to give a refund to someone who just ate the entire thing in front of you and now they want their money back. Likewise, you probably don’t want to offer refunds to people who waited three months, six months, a year to bring up their complaint.
But, by and large, you shouldn’t make it difficult for customers to ask for refunds. Make sure that customers know your refund policy, put it somewhere where they can find it. Don’t play the sneaky retailer game of catching customers on the fine print. Don’t make them work for a refund. Write a reasonable refund policy, and, when the situation calls for it, be flexible with your refund policy.
A bad refund experience is a bad experience, and bad experiences are what push your customers into the arms of your competitors. When someone has had a bad experience with your company, they will gladly pay more somewhere else just to avoid supporting you. That a bounced refund request usually happens at the end of a transaction means that it’s a bad taste you’re leaving in a customer’s mouth.
Will there be people who take advantage of your refund policy?
Probably. But those are the same people who will just hit you with chargebacks if you make refunds impossible to have approved. You’re not protecting yourself from friendly fraud with a challenging refund process, you’re just making your best customers mad at you. If anything it’s better than a fraudster uses your refund policy to get their money back than a chargeback, because a refund doesn’t look bad on your record or have you paying more money to your processor.
2. Manage Your Chargebacks Right Away
Dealing with chargebacks is like paying your taxes: A pain in the neck, but the longer you wait, the bigger a problem it’s going to be. When you look at your chargeback reports, you’re going to find that it was filed for one of four reasons: Clerical, fraud, quality or technical. It’s important to look at what the reason was for the chargeback so that you can do something about it.
If it’s fraud, you can keep an eye out if the person using the stolen card comes back into your store or tries to buy from you again. If the problem was clerical, then you need to look at how you’re keeping your books and filing your paperwork so that you can avoid chargebacks of this nature in the future. Technical means that someone is trying to use an expired card or a debt without enough money in the account. This could be an honest mistake on the customer’s part, or it could be an attempt at friendly fraud. You’ll have to take it on a case by case basis. Finally, there’s quality, which means that the product shipped didn’t match the description, or it was damaged on arrival or etc. It could just be that the post officer sat on the box by accident, but it could also mean that you need to be more careful in packing things to ship, or you need to make sure that your descriptions are accurate.
Anyone of these reasons can be a cover for friendly fraud, of course. You’ll need to investigate each case individually to determine the nature of the chargeback.
3. Get In Touch With Your Processor
Chargebacks will generally be handled by the customer’s bank, not by your payment processor. But, your processor can help you to get fewer chargebacks in the future by addressing the reason you were hit with a chargeback. You can require billing addresses, for instance, to make it harder for people to commit fraud.
Your processor probably can’t have a chargeback overturned, but they can help you to take steps to make chargebacks less likely in the future. They don’t like chargebacks anymore than you do, so they’re usually more than willing to go the extra mile to help you out and make sure that it doesn’t happen again.
4. Keep Detailed Records
When you file a dispute for a chargeback, you’re going to be met with a lot of resistance. Your payment processor doesn’t want chargebacks, but your customer’s bank doesn’t really care. They’re not going to give you the benefit of the doubt, it’s going to be an uphill battle and you need to be armed with everything you have to back you up.
Don’t just keep receipts, keep emails, IP addresses, ledgers, timestamps, phone records and order histories, as well. Not to mention invoices, shipping receipts and, well, just about every piece of paperwork and digital record you can to establish your case.
5. Follow Up On Each Chargeback
You remember when we said banks don’t care? They really don’t. Their resolution department is probably never going to call you back to discuss the chargeback case, even if they say they will. This means that it’s your job to make the followup call. You can give it a few days, but don’t sit around waiting for them to call you, they won’t. And you have every right to have your concerns addressed, so don’t be shy about it.
Be proactive in every step of the process. They’re probably going to be very vague and non-committal with you, so be a little pushy if you really need to be. Ask them if they have all the information that they need to make a decision. Ask them what you can do to help hasten the process along. Ask them how long it usually takes to resolve these things. Ask, ask, ask. Think of it as if the chargeback resolution department is your teenage nephew working at your store for the Summer. You hired him as a favor to the family, and if you fire him, your sister’s gonna yell at you. But you’re gonna have to walk him through every single step of the job, even after you’ve already told him how to run the register five times over by now.
6. File A Dispute, Every Time
An apology can be legally binding. If you try to pay someone off, that’s admission of fault. This is why you need to dispute every single chargeback that comes your way. Even if you think it’s a long shot that the chargeback will actually be overturned, disputing it is at least establishing a record of you not admitting fault.
So, why don’t you want to take the blame for any chargeback? Because the more uncontested chargebacks you have on your record, the harder it will be to dispute chargebacks in the future. Maybe that five dollar chargeback doesn’t seem like a big deal, but it’s important that you establish a record of your contesting it, or else it just goes right on your record and you have less credibility in future cases.
It’s like being a lawyer. Maybe if you lose this case, your client does a few hours of community service. Big deal, right? But it still counts as a loss, and it still costs you credibility.
The best approach is to try and keep chargebacks from happening in the first place, but chargebacks will happen from time to time, and while disputing them can be a headache, it’s worth it because it will help you to maintain reputation and credibility in the long run. There are fly-by-night companies that rely on spam to make sales and that don’t really care about chargebacks because they’re going to fold the company the minute it comes under scrutiny from any government authority. By communicating clearly to your customers and partners and financial service providers that you’re not going to take chargebacks lying down, it lets them know that you’re in it for the long haul. You’re a legitimate business owner and operator, and you plan on keeping this business going for years to come, that it’s not just a get rich quick scam or something, and you do care about the customer’s experience.
Keeping The Customer?
When you have a customer who hits you with a chargeback, you may feel a bit jaded on the whole experience. You’ve been treating this buyer fairly for years, and now because of a mistake on the part of the post office, they hit you with a chargeback? Well, before you lose your cool, consider that customers don’t typically know how badly a chargeback can hurt a business and what a headache it can be for you. They might think it’s just a quicker way to get a refund.
But, you do have to draw a line somewhere. If someone is filing for a chargeback once a month, they’re either trying to defraud you, or they just don’t know what they’re doing. Either way, if it feels like a whole new part-time job just dealing with one finicky customer, then it might be best to just cut your losses and start refusing their business.
Beyond that, if you follow the steps listed above, then you should have fewer chargebacks, and you should be more prepared to manage them when they do happen.