Prac­tices to Help On­line Busi­nesses Pre­vent Chargebacks

If you are an on­line mer­chant, you are most likely fa­mil­iar with charge­backs – a forced re­fund ini­ti­ated by the buyer through his or her credit card company.

You also know about all of the ways in which charge­backs neg­a­tively im­pact your busi­ness, in­clud­ing the fees as well as the loss of profit, your mer­chan­dise and your cred­i­bil­ity as a seller.

While charge­backs are some­times un­avoid­able, there are some ways to make sure that charge­backs are kept to a minimum.

Be Proac­tive in Fraud Prevention

There are cer­tain signs which sug­gest that a trans­ac­tion might be fraud­u­lent. Visa has pro­vided a list of signs to watch for in card-not-present trans­ac­tions here. You should fa­mil­iar­ize your­self with these red-flag in­di­ca­tors. Also watch for other sus­pi­cious be­hav­iors such as or­der forms which lack im­por­tant and ob­vi­ous in­for­ma­tion like the buyer’s last name.

Mas­ter­Card and Visa Pro­vide Tools to Help Pro­tect Your­self – Use Them!

There are sev­eral dif­fer­ent pieces of in­for­ma­tion which you can ask a buyer to pro­vide when they sub­mit an or­der. This in­cludes card ex­pi­ra­tion date, ad­dress ver­i­fi­ca­tion and the card ver­i­fi­ca­tion value. These will en­sure that, if noth­ing else, the buyer is at least hold­ing the card used.

In ad­di­tion, the credit com­pa­nies both of­fer their own method of in­ter­nal fraud pre­ven­tion – Ver­i­fied by Visa and the Mas­ter­Card Se­cure­Code, of which you have the op­tion to take advantage.

Don’t Over­look Tools Pro­vided By Your Pay­ment Processor

Be­sides those of­fered by the ma­jor credit card com­pa­nies, there are sev­eral ways in which your pay­ment proces­sor can help pro­tect you from charge­backs as a re­sult of fraud­u­lent purchases.

• Black­list: A list of peo­ple whom you do not al­low to process trans­ac­tion with your busi­ness. This can in­clude spe­cific IP ad­dresses or even en­tire countries.
• Whitelist: While a black­list bans spec­i­fied buy­ers, a whitelist will ban every­one ex­cept for cer­tain des­ig­nated ex­cep­tions. For ex­am­ple, you can choose to ac­cept or­ders only from buy­ers in the US and UK.
• Max­i­mum Lim­its: You can also elect to have a max­i­mum spend­ing amount per trans­ac­tion.  There­fore, de­fraud­ers are not able to or­der a huge amount of mer­chan­dise us­ing a stolen card, for which you will be on the hook when the card­holder re­al­izes what has happened.
• Ve­loc­ity Checks: You can pre­vent buy­ers from plac­ing too many or­ders with the same card or from the same IP ad­dress within a short pe­riod of time.
• Trad­ing Name: En­sure that your company’s rec­og­niz­able name ap­pears on the buyer’s state­ment. Oth­er­wise they might see a name which they don’t quickly rec­og­nize, panic and call their credit card com­pany to claim that they’ve been the vic­tim of fraud.

Pro­vide Ex­cel­lent Cus­tomer Service

Per­haps the most ob­vi­ous and ba­sic thing which you can do to pre­vent charge­backs is to pro­vide ex­cel­lent cus­tomer service.

Be sure to suc­cinctly ex­plain ship­ping and or­der pro­cess­ing poli­cies and abide by the time­frames you posted. In ad­di­tion, take care to pro­vide clear prod­uct de­scrip­tions, make your con­tact in­for­ma­tion read­ily avail­able, and be sure to re­spond quickly and ef­fec­tively when a buyer has a question.

Keep ac­cu­rate records of all your trans­ac­tions. This will help en­sure you don’t bill a cus­tomer twice. It will also make the ter­mi­na­tion of re­oc­cur­ring trans­ac­tions eas­ier.  By keep­ing ac­cu­rate records, you also have a bet­ter chance of win­ning charge­back rep­re­sent­ment and avoid­ing charge­back dis­putes (learn more here).

While there is lit­tle you can do to make sure you never have to deal with a charge­back, by fol­low­ing these sim­ple processes you can at least en­sure that they are a very rare oc­cur­rence, and that their im­pact on your busi­ness is minimal.