Preventing Credit Card Chargebacks on E-Commerce Sites

Sep 23, 2015

Chargebacks remain one of the biggest issues for online merchants. Unfortunately, as more and more consumers take to online shopping, cases of chargebacks have only increased and can be expected to increase even further going forward.

Essentially, a chargeback happens when a consumer realizes a mistake on their credit cards and calls their card issuer. The issuer then investigates the matter and if they come to a conclusion that the mistake occurred due to the carelessness of the merchant, the card issuer will refund the cardholder and demand reimbursement for the amount in question plus certain fees from the retailer.

Chargebacks therefore not only cost the merchant in terms of the amount refunded but also in fees. Moreover, handling chargebacks can be a complicated matter that could lead to a lot of wasted time. This is why every merchant does everything to avoid them.

You also need to appreciate that although most chargeback claims are legitimate, a significant number are also faked.

Fighting a chargeback

In the event of a chargeback, the card issuer will carry out an investigation to uncover the truth of the matter. But even before commencing the investigation, the company might allow the consumer and the merchant to try and resolve the matter on their own.

However, you don’t always have to wait for a chargeback to occur. Here are a few proven ways of preventing them;

  • To prevent “undelivered products” claims, use a delivery service that offers delivery confirmation such as FedEx and UPS.
  • To prevent “broken product” claims, purchase shipping insurance. This way, if the goods arrive at the destination with visible damage, the customer can refuse or return the shipment and you can file a claim.
  • For “broken products” not caused by shipping you can either have the customer contact the manufacturer directly (for products with warranties) or ask them to ship the products back to you. You need a very clear return policy that states this clearly.
  • For; “I never ordered this product” claims ensure that you have necessary documentation to prove otherwise. Also, never ship merchandise to a different address other than the billing address of the credit card.
  • For; “I made a return” claims, ask for a confirmation number. If they have the number then that’s okay. If they don’t, then the credit card issuer won’t even bother you.

Apart from these tips, you could also open a payment processing account with a provider such as EMB that provides merchant chargeback protection.

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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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