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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