The bane of small businesses, particularly those in high risk sectors, are excessive to chargebacks. Chargebacks are like termites for merchants. They’re small, ever-present annoyances that can undermine the walls and floors of your business. Merchants may be familiar with chargeback insurance as a mechanism to cope with chargebacks. Yet, there are limits on the amount of damage insurance can prevent.
How Chargebacks Hurt your Business
Chargbacks can be the product of both fraudsters and legitimate customers. Customers that produce address or personal information that doesn’t match the system can cause a chargeback as well as those returning products. More deliberate scammers may use fraudulent tactics to take advantage of chargebacks as well.
In the best case scenario you’re wasting time dealing with chargebacks and wasting money paying fees. Worst case scenario you wind up on a Terminated Merchant File (TMF) list that prevents you from processing credit and debit cards.
Chageback Insurance and How it Helps
Chargeback insurance helps merchants weather the penalties imposed by chargebacks. It is like other forms of insurance—protecting you from unforeseen circumstances. There are several beneficial areas that chargeback insurance covers. For example, you can use your policy to recover losses from counterfeit credit cards used by scammers. The insurance will also cover “ship to” changes in address that occur post-purchase. Finally, if there’s a signature mismatch when the customer signs at point-of-sale the insurance will kick in and cover your chargeback loss.
Where Insurance Falls Short
Having a chargeback insurance policy may seem like an effective countermeasure. It will help you protect your bottom line—but to a limited degree. This is not blanket protection, there will still be areas where you are unprotected by chargeback insurance. Chargeback insurance will not protect you from “undelivered purchase” scams and “poor quality” complaints that resulting in chargbacks.
The greatest shortcoming of chargeback insurance is that it will not reduce your chargeback ratio. A poor ratio of chargebacks can lead to banks refusing to process your credit card transactions. It can also have a long-term impact on opening new merchant accounts and escalating fees.
Alternative to Insurance – EMB Chargeback Shield
If you are looking for a more comprehensive and effective solution to a high chargeback rate and ratio, eMerchantBroker’s new Chargeback Shield may be the best answer for your business. The Chargeback Shield brings you, the merchant, back into the loop when a chargeback occurs. As soon as a credit card company receives notification the Chargeback Shield activation and gives you the option of accepting or refusing the chargeback.
This approach to chargebacks means you can help reduce chargebacks as they are occurring. You aren’t looking for compensation but rather prevention. The Chargeback Shield utilizes a network that’s already in place between banks and credit card processors and simply brings you back into the chargeback fold.
For Chargeback Protection contact us today!