The Ultimate Guide to Managing Chargebacks

How Chargebacks Hurt Your Business: At first look, credit card chargebacks appear to be much like refunds. However, there is one extremely unique difference in between a chargeback and a refund. With a chargeback, the customer contacts the credit card company or bank for a refund, rather than the business they made the buy from. While chargebacks are created to safeguard consumers from unapproved transactions, it’s important to understand chargebacks and their effect on credit report so you can avoid any destructive impact to your company.

Do Chargebacks Hurt Your Business Credit Profile?

Fortunately, chargebacks will not have an unfavorable influence on your company credit rating. But, if you get enough of them, they can affect your merchant account. This can cause higher processing charges and/or the loss of merchant accounts.

How Does a Chargeback Work?

There are a variety of actions associated with the chargeback process. Here’s a quick summary of it.

1. Customer Disputes the Purchase

If a consumer does not get a product, determines a product or service is not as described, or sees an unauthorized transaction, they might call the charge card company to challenge it.

2. Company Reviews the Chargeback

When the provider receives the chargeback demand, they’ll identify whether it’s void or valid. If it’s invalid, the process will end and the customer will be alerted. Nevertheless, if it stands, the process will continue.

3. Client Gets Reimbursed

The issuer will process the valid chargeback and provide the client with a credit for the amount they challenged. When this happens, business’s merchant account is debited for a credit charge and they’re on the hook for a chargeback fee that ranges from $15 to $100.

3. Merchant Receives the Chargeback

After the consumer gets reimbursed, the merchant will find out through their merchant account processor. They’ll receive an e-mail notification or physical letter in the mail. The alert will consist of instructions on how to respond to the disagreement.

4. Merchant Responds and Appeals

The merchant has the choice to send a reaction and appeal the chargeback. If they’re unsure of what a chargeback is, or think the chargeback isn’t worth much, there’s a likelihood they will not react and just accept the chargeback.

If they do react, they’ll need to prove they offered the product and services in questions and might wait months for the chargeback to deal with. Often, the process of appealing a chargeback can cost more than the value of the original services or product.

How Chargebacks Hurt Your Business?

Because the disagreement process is so easy, you can’t neglect chargebacks and their result on credit history can have– even if it is indirect. Do not be shocked if consumers demand chargebacks, even when there hasn’t been any deceptive activity. They might do so because they weren’t pleased with your services or product or think it was wrongly represented online. Or, they merely didn’t recognize the charge on their charge card declaration.

If you’re a company owner, it’s important to take chargebacks extremely seriously. Here’s why: When you’re hit with a chargeback, you’ll miss out on more than simply the dollars that were disputed. You’ll likewise lose money on chargeback fees in addition to all the time and money you spend selling, packaging, and delivering the product.

In case your chargeback ratio (overall chargebacks divided by total sales deal) reaches a specific point, you’ll face among these effects: higher processing charges or a lost merchant account. If you entirely lose your merchant account, you’ll need to discover a credit card processor who accepts “high risk” merchants.

Avoiding Chargebacks

While you may not have the ability to totally avoid them, there are several things you can do to lower chargebacks. Here are a number of concepts.

Excellent Customer Service

In today’s increasingly competitive marketplace, the consumer truly is king. So if you treat every brand-new and devoted client well, they’re less most likely to initiate a chargeback. If you learn a consumer is disappointed for any factor, connect to them promptly to resolve the issue.

A Customer Centric Return Policy

When it concerns your return policy, attempt to be as flexible and lax as you can. Likewise, ensure it’s clearly detailed and easy for almost any consumer to find and comprehend. Remember that a return is far more affordable and easier than a chargeback.

Offer Live Chat

A live chat can provide clients the quick answers they need to prevent chargebacks. For instance, if they can go to your site, chat with a representative, and discover when their package will arrive, they may refrain from pursuing a chargeback.

In-depth and Accurate Product Descriptions

If you’re an online retailer, make it a top priority to compose highly detailed and accurate product descriptions. By doing this your consumers will understand exactly what they’re purchasing. Good descriptions can eliminate surprises and the temptation to pursue chargebacks.

Sensible Expectations of the Product/Service Results

When you offer your items and/or services, don’t make promises you can’t keep. Set reasonable expectations with your customers so they know precisely what they’ll get if they invest in your offerings.

Easy to Find Shipping/Tracking Information

While some clients won’t mind waiting on your products, others will want to receive them as soon as possible. Since those who do not wish to wait may submit chargebacks, it remains in your best interest to supply them with shipping and tracking information. This information can keep them current with the status of their order and lower their opportunities of initiating a chargeback.

Follow Up on Irregular Orders

If you discover that a client who typically purchases the same items each month places an irregular order, follow up with them. Following up can permit you to make sure there was no mistake on your client’s behalf and prevent a chargeback as a result.

Document Conversations with Customers

Keep accurate records of your consumers’ charge card deal quantities and dates along with their authorization details. You must also record any discussions you have with customers and keep any receipts or contracts they signed. Paperwork can permit you to win a disagreement versus a client who is trying to benefit from the chargeback system or forgot they purchased.

Utilize a Clear Descriptor

If your company name is “Sandy’s Vitamin Shop,” that is the name that should appear on each consumer’s credit statement. A parent name or different name that clients don’t recognize can put you at high danger for chargebacks. Your payment descriptor need to be really clear and quickly recognizable by your clients. provides payment processing and high risk merchant accounts with built in chargeback mitigation. Reach out to us today for a consultation.