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How to avoid and handle chargebacks properly...

How to avoid and handle chargebacks properly



Disputes happen for a reason and you should take them seriously!

The reasons behind credit card chargebacks should be analyzed carefully as they can show what you need to do to resolve the issue and prevent similar chargebacks in the future.  Here is what you need to consider to keep chargebacks as low as possible.

Billing descriptor

The way the company’s name appears on customer’s credit card statement is called a billing descriptor and should remind the cardholder of the purchase. It is particularly important for businesses accepting payments in a card-non-present environment, where there is no physical interaction between the merchant and the customer. In the event that the descriptor differs from the name of the merchant or the URL of the website, the merchant is obliged to list on the website as well as on the payment page what the billing descriptor will be. In any event this should be considered as best practice.

What if the cardholder still does not recognize a transaction on his/her statement? For e-commerce entities, the descriptor should always include the phone number of the merchant’s customer service. That way the cardholder can contact the merchant for further details. Hence, it is vital to have as clear and informative as possible billing descriptor to avoid any misunderstanding,

An example of a good descriptor for a web site www.example.com might be as follows:

www.example.com +1 800 1234 1234

Customer service

In a competitive market, it is very important to maintain the highest level of customer service. As noted above, the phone number of the merchant should be presented clearly on a merchant‘s website and should also be included in the billing descriptor, along with the operational hours of the call center. A toll-free number and the option for a live chat is what many merchants provide nowadays. Please note however that any verbal agreement is not accepted as evidence during the dispute process. Therefore, the merchant should provide all important information in written form, by e-mail or via post.

Whether by phone, by e-mail or in a letter, the cardholders’ queries should be handled promptly.  Sometimes disputes occur simply because the customer does not get a timely response from the merchant. Last but not least – any promises the merchant has made, whether a refund or  a cancellation, etc. must be performed immediately.

Recurring transactions

Recurring transactions are preferred by merchants as they increase customer loyalty and improve cash flow via timely and regular payments. In order to manage them effectively, the merchants should provide a clear statement of the cancellation policy on the web-site. The cancellation process should be clear and the merchant should make it obvious to the cardholder exactly what is required to be done to cancel.

The merchant must ensure that the billing is discontinued immediately after the cardholder has completed the cancellation procedure. Furthermore, the cardholder should  receive a cancellation confirmation by email or letter including details of when the last billing has, or will, occur and  if a credit will be processed, in  accordance with  the terms and conditions of the merchant’s cancellation policy.

Handling copy requests properly

When a cardholder does not recognize a charge they may request copy documentation to remind them and this is the dispute stage preceding a chargeback. The requested information may jog the cardholder’s memory enough to prevent the chargeback and it is vital therefore for a merchant to immediately respond to such requests and include all pieces of documentation and evidence they have to prove that the cardholder made the transaction.  The more information the merchant can provide the more likely their chances to avoid a further dispute in the form of a chargeback.

If the copy request is due to a fraud on the part of a third party and if the merchant is offering a product or service with recurring billing, it is best that the card number be blocked to avoid future chargebacks. The merchant should still consider refunding the transaction to prevent a chargeback.

In short as a merchant you should focus on the detail of the way you operate your business as sometimes small changes can make a big difference in the number of disputes you receive.  The devil is always in the detail!

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