How to Effectively Protect your Business from Chargebacks

Feb 28, 2017

In a world where online shopping is the norm, chargebacks are arguably an e-commerce merchant’s worst nightmare. Every internet-based retailer dreads waking up to a bunch of messages about a customer disputing a previously approved transaction.

Chargebacks are a headache because the burden of proving that the client was rightfully charged solely falls on you as the merchant. Moreover, information about a chargeback never reaches you until it’s too late, and the product has been shipped to the customer. You, therefore, end up losing both the product and the revenue from the sale when the chargeback is approved.

With this article, we aim to shed more light onto the chargeback menace, as well as the steps you can take to prevent them.

Why do chargebacks happen?

A customer can opt to dispute a sale for several reasons. Some, such as incorrect billing, and delivery mistakes lay blame on the merchant, but occasionally, a chargeback can result from dishonest clients, as well as fraudsters.

Whichever the reason, the customer’s bank cannot release payment to the seller until the dispute is resolved.

Chargeback fees

For most businesses, chargeback fees payable to the payment processor are even more stressful than the imminent loss of revenue. These fees are charged immediately a customer disputes a sale, and the merchant has to pay, whether or not they win the case.

Additionally, if your chargebacks exceed 1% of your total sales amount, your business attracts the attention of a chargeback monitoring program overseen by card associations, as well as a hefty fine. In most cases, your processor will just opt to terminate your merchant account.

Prevention measures

Because the cost of chargebacks is heavy, merchants should make it their priority to protect their businesses. And the first step to doing so is to employ good business practices.

For instance, ensure your advertisements are as truthful as possible and have clear terms of service. Avoid clerical errors by counterchecking everything before finalizing a sale. Furthermore, communicate with your customers. If a buyer knows what to expect in the package, they’ll be less likely to request a chargeback.

That said, even the most streamlined business policies will do little to protect you from chargeback fraud. To be safe, therefore, sign up for a payment processing account from a company that provides practical solutions to deal with chargebacks.

eMerchantBroker, for example, accompanies its accounts with a chargeback shield system by “CBS’s Cardholder Dispute Resolution Network (CDRN) is powered by Verifi and the Ethoca alert system, which alerts a merchant the second a customer files a chargeback. This enables them to respond quickly and thus avoid accumulative fees.

*Chargeback Shield is not an insurance service. EMB does not sell insurance and Chargeback Shield is not insurance, it is an alert system.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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