How To Fight a Huge Chargeback

Apr 20, 2018

Online chargeback is a thing that business owners should be wary of when selling services or products online. Are you dealing with chargebacks? What are the reasons? How can you prevent chargebacks? This article will give answers to your questions.

What Is a Chargeback?

The groundwork for credit card chargebacks is associated with The Truth in Lending Act of 1968. However, according to the experts in the payment industry, The Fair Credit Billing Act of 1974 should be recognized as the invention of chargebacks.

What are chargebacks? These are disputed transactions in fact. Customers dispute these charges on their credit cards for different transactions. When they make a dispute, the merchant reverses the transaction and the money goes back to the customer.

Chargebacks can cause many headaches for merchants. When customers dispute a transaction for a reason, merchants go through a rather complicated process. As a result, they not only lose a sale but also end up with unnecessary fees.

E.g., if a consumer is a victim of identity theft and unauthorized transactions have been made, this consumer should contact the bank right off the bat. The cardholder will want to recoup the stolen amount. The bank can also help avoid future losses. Even if the customer is dealing with fraud (or he/she thinks it’s fraud), the consumer should communicate directly with the merchant.

Merchants need to be well aware of chargebacks and how to manage their chargeback ratio.  Why? Very often, too many chargebacks result in closed accounts or make it impossible for merchants to obtain a new one.

Do you know how to calculate your chargeback ratio? All you need is to divide the number of chargebacks by its number of monthly transactions. By the way, for processors, the actual dollar amount of a chargeback is of no significance.

Need Chargeback Insurance? How to Prevent Chargebacks?

If you, as a merchant, aren’t well aware of transaction disputes and the reasons cardholders file chargebacks, you’re going to lose revenue and potentially hurt your relationship with card networks.

Do you know why payment processors want to see chargebacks below 2%? Well, your processor faces potential Visa/MasterCard fines if it allows you to continue processing and your chargeback ratio is above 2%. By the way, the mentioned fines are larger than the revenue it makes from your account.

So, if your processor sees your chargeback ratio is more than 2%, it’ll almost always terminate your account. So, you need to keep your ratio below 2%.

Merchants who want to safely and securely accept electronic payments should work only with reputable credit card processors like eMerchantBroker.com. EMB is voted the #1 high risk processor in the US and boasts an A+ rating with the BBB, as well as an A rating with Card Payment Options.

If you’re interested in chargeback insurance, turn to eMerchantBroker.com. EMB tailors payment processing solutions to meet every merchant’s needs and help them prevent chargebacks easily. How? eMerchantBroker.com offers a special chargeback prevention program or chargeback disclaimer that can help you prevent 3 out of every 12 potential chargebacks.

In partnership with Verifi and Ethoca, EMB provides merchants with an unmatched alert system to help you fight chargebacks successfully. So, you get a perfect opportunity to achieve the highest rates of chargeback resolutions in the most efficient ways.

What are the reasons for lots of chargebacks?

  • Fraudulent transaction (fraud is the most common cause of chargeback)
  • Failure to describe products/services appropriately
  • Cardholder doesn’t recognize the transaction
  • Services isn’t rendered, or merchandise isn’t received
  • Credit isn’t processed
  • Duplicate processing
  • Human error
  • Transaction amount differs from the agreed-upon amount
  • Recurring transaction is canceled
  • Unauthorized mail or telephone transactions
  • Items aren’t shipped, or defective goods are shipped
  • Invalid credit card or account number

How can you keep your chargeback ratio low?

  • Stick to a DBA or “Doing Business As” name that your customers know
  • Don’t fail to send confirmation and customer satisfaction emails
  • Don’t forget to print your phone number on the customers’ billing statements
  • Integrate customer dispute alerts
  • Train customer service reps to start with a refund
  • Maintain high transaction counts
  • Don’t fail to verify the address, customer details, and phone number by the credit card issuing bank
  • Clearly indicate one should expect when making a purchase
  • Have a refund policy page on your website
  • Do not accept a credit card that’s expired

When chargebacks are no more under control, expect huge losses. In addition, expect to lose your company’s good image in the eyes of credit card processors. To avoid chargeback problems and operate profitably, take the necessary steps to enjoy the lowest chargeback rate.

 

 

*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 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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