Are Chargeback Fees Just an Unnecessary Expense?

The term ‘chargeback’ sends shivers down the spines of many business owners. It might seem like a minimal fee, but its significance is far beyond chargeback fee. Chargebacks can ruin your reputation with the merchant account industry. Many businesses just see it as a risk they have to take. After all, the alternative would be to refuse credit card payments, which is no alternative at all. Fortunately, you do have a way out, and it’s easier than you think.

First off, what is a chargeback? When a customer buys something from you, and then decides that they didn’t get what they paid for, they can cancel the transaction and request a refund from their credit card company. At the most basic level, chargebacks affect your business on fronts. One, you lose the sale. Two, if the customer requested the refund after receiving the product or service, you also lose the value of said product or service; alternatively, you may have to pay the shipping costs to have it returned.  Three, there is a chargeback fee.  And four, excessive chargebacks can trigger an audit of your merchant account, or even cause your account to be closed.

Side effects of chargebacks

Now let’s look at the indirect cost. If you have too many chargebacks, your payment processor will get concerned. They’ll keep a closer eye on you, possibly branding you as a ‘high risk’ business and restricting access to their services.

On the upside, there are a few things you can do to avoid chargebacks. The main reasons customers wind up requesting refunds are easily remedied.

Avoiding chargebacks

A customer may ask for their money back if shipments are delayed, they don’t recognize the billing name on their card statement, or if they don’t realize that their transaction went through successfully, and they make a substitute purchase elsewhere. You can prevent these misfortunes by:

• Using a merchant processor with instant verification.
• Clearly listing your company name on the customer’s billing statement.
• Prominently displaying a clear refund policy (even if that policy is “no refunds”).
• Offering prompt, polite customer service.

For more information on avoiding chargeback fees, or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.