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Reduce Your Credit Card Chargebacks in 5 Easy Steps

April 27, 2021

In the eCommerce marketplace, your ultimate goal is to sell your products to the customer so you can make money. It seems simple, but it’s not always that straightforward. Credit card chargebacks can make this process more difficult than intended.

When chargebacks occur, they can turn otherwise simple business transactions into tedious disputes with chargeback fees that can add up over time. By understanding how credit card chargebacks work, your business can take steps to streamline your credit card processing and reduce chargebacks.

Let’s take a closer look at the meaning of credit card chargebacks, how high-risk merchant accounts can benefit your business and our step-by-step to avoiding chargeback fees altogether.

What Are Credit Card Chargebacks?

Credit card chargebacks are reversals of credit card payments requested by customers and completed by the credit card company or bank. The chargeback process occurs when an individual contacts their bank or credit card company and requests money spent on a purchase be returned to them for one reason or another. Chargebacks can be demanded for up to six months after the original transaction takes place.

Essentially, it involves disputing a credit card charge in hopes of gaining an account credit and providing the merchant its funds in return. In most cases, a credit card chargeback is requested because of a billing error or failure to provide the product or service that was expected of the merchant. Unauthorized credit use may also be the reason to consider credit card chargebacks.

Originally, credit card chargebacks were created to protect consumers from fraud but that is not always the case for why chargebacks occur. While the cardholder may truly be a victim of fraud, in other cases consumers file for a chargeback with their bank or credit card company even if it was a legitimate purchase. There are several types of fraud that can encourage credit card chargebacks, such as:

  • Credit Card Fraud – Customer chargeback when a card is stolen and used to make unauthorized purchases.
  • Merchant Error – Chargebacks occur due to merchant error, such as when the merchant bills an incorrect billing amount.
  • Friendly Fraud – This occurs when the cardholder receives the product or service but either changes their mind or does not recognize the charge on their billing statement due to forgetting about the purchase.
  • Identity Fraud – When someone gains someone else’s sensitive information, such as a social security number, passport or driver’s license to assume their identity and make a fraudulent acquisition.
  • Account Takeover – When someone attempts to add their personal contact information to an account as if they are a registered user, thus providing them full access to the funds to make purchases.

For merchants, credit card chargebacks are frustrating experiences, but some which are not going away in the near future. In fact, according to Juniper Research, chargebacks are increasing 20% each year. Not only is the process frustrating, but a chargeback fee for each disputed transaction can add up in cost – losing money for your business. However, there are some ways to reduce credit card chargeback fees.

High-Risk Merchant Accounts and Credit Card Processing

A high-risk merchant account is a payment processing account for merchants that are considered a high-risk service by an acquiring bank. While credit card processing is incredibly essential for high-risk industries since it allows merchants to gain access to processing services they would otherwise be unable to, high-risk businesses typically suffer from a greater percentage of credit card chargebacks.

Whatever the reason is for chargebacks (justified or not), credit card processing networks typically turn to banks to recover funds that have already been transferred to the merchant. Financial institutions often refuse to provide an account to businesses they categorize as high-risk as they prefer to not deal with chargebacks and other reversals. However, high-risk merchants can gain access to credit card processing and other payment method services by utilizing a payment gateway and a merchant account. Through the use of payment gateways, high-risk businesses can help prevent excessive chargeback fees and make a bank more willing to work with them through a trusted payment processor. A merchant account, specifically, is the place where customer payments will be deposited. This isn’t generally the place to manage everyday expenses, but it’s where all transactions carried through the payment processing platform will land, acting as the middleman between the business and the consumer.

5 Easy Steps to Avoid Chargeback Fees

High-risk businesses need to be adamant about providing a seamless, efficient process for customers to avoid the potential of credit card chargebacks.

Disputed charges can have a significant impact on your business’ bottom line, reputation and ability to retain customers. When lenders continue to identify your business as high risk, you may find it more difficult to fund future expenses and grow your company. Avoiding all credit card chargebacks may be impossible, but there are ways to reduce your chances of dealing with them in the first place. A strong mitigation plan in place protects you from chargeback ratios that impact your credit rating and business reputation.

Here are some steps to avoid credit card chargebacks  – and the often complex chargeback process!

1. Use Detailed Descriptions Of Your Business’s Name

Friendly chargebacks can occur if customers don’t recognize a transaction charge on their credit card statement. This can occur if the customer doesn’t know – or recognize – your company name. As a result, they may dispute the charge as fraud.

To prevent friendly credit card chargebacks, your credit card billing descriptor must be similar to your business name and your business products must have a proper description. In this description, be sure to use keywords that remind the customer of what purchases they’ve made. Including the type of product or service you product, or the specific names, can be a useful indicator in your description. Having a detailed statement descriptor can eliminate potential chargebacks by better informing customers about the purchase.

Credit-card-chargebacks-are-often-caused-by-customer-disputes.

2. Adopt the Right Technology

Technology is advancing at such a fast pace that it’s crucial to keep updating your credit card processing. While there are many tools available, having an advanced payment processor can help prevent chargebacks associated with out-of-date payment platforms. The more security features and alternative payment methods available, the better suited your payment processor is at preventing credit card chargebacks. Transcend Pay’s Merchant Payment Gateway, for example, is a payment processing tool that integrates directly into your current payment system so you have the ability to quickly and easily accept multiple forms of payment for both low-risk merchant accounts and high-risk merchant accounts.

3. Updated Security Measures

Credit card fraud is the primary reason for credit card chargebacks, accounting for 30% of all reversals. By implementing security measures, such as fraud protection filters in the payment gateway, you can help prevent credit card fraud and the ensuing chargebacks. Two common fraud filters are:

  1. Card Verification Code (CVV/CVV2): The CVV/CVV2 is a three-digit security code on the back of all credit cards. When a cardholder makes a purchase, they enter their credit card details, including the bank identification number, and the code. The card will be denied as a safety precaution if the security code doesn’t  doesn’t match the issuing bank records.
  2. Address Verification System (AVS): This process forces the cardholder to enter their billing address when shopping online. The merchant can compare the billing address to the issuing bank documents; if it doesn’t match up, the card can be declined.

By using these security methods, you can help reduce criminal behavior and the transaction disputes that occur from them.

4. Increased Compatibility With Payment Methods

Find a payment processing solution that is compatible with a variety of payment methods and can accept digital payments from any location. Updated payment processors that are designed to provide multi-channel mobile payments will be less likely to cause service or merchant errors that can result in chargebacks. Mobile compatibility can make it easier to transfer money to borrowers and collect payments from anywhere, at any time. Plus, mobile can lead to a greater opportunity to optimize the customer experience. You can gather data from customers that displays how they’re using funds to better mitigate risks and identify streams of growth. Modern payment processing allows for the most accessible and streamlined processing experience without hiccups that can result in disputed transactions.

5. Provide An Easy Refund Process

A flexible refund policy can provide a positive experience for customers who will likely not issue chargebacks. This includes providing an easy process for refunds; consumers should be able to make a simple request for a refund and have their refunds processed promptly. The more reliable the customer service process, the more likely that the concierge will issue friendly chargebacks. For instance, include the customer service number or email as part of the statement descriptor. This allows customers to quickly contact the right number when looking for a refund.

Be sure that your refunding policy is clear and readily available to all customers. Posting it throughout your store and website makes it easy for all consumers to understand their options after making a purchase.

Prevent Credit Card Chargebacks With Transcend Pay

Making steps to reduce credit card chargebacks and improve payment processing make your daily transactions easier to manage. Finding a payment processor not only helps your high-risk business process payments, but can also assist in approving loans, delivering instant funds and issuing eChecks in an efficient manner can help you transcend against the competition.

With a Merchant Payment Gateway from Transcend Pay, your high-risk business can gain access to a variety of online payment processing services without being held down by potential chargeback fees. In addition to online credit card processing, you can also use our merchant gateway to send and accept payments with several distribution channels to provide a secure and reliable payment processing experience. Here’s how it works:

  • Accept credit and debit card payments. Cash is still very relevant, but card payments account for more than half of all customer transactions. If your business can’t properly process these transactions in a safe and efficient way, you may find yourself dealing with serious business complications. Transcend Pay’s Merchant Payment Gateway seamlessly connects your POS and your merchant account  to all leading credit card networks. This enables the safe, secure and quick processing of credit and debit card transactions.
  • Automated Clearing House Network Access. The ACH Network processed 7.3 billion payments in the second quarter of 2021 alone, 655 million more than Q2 of 2020. Transcend Pay’s Merchant Payment Gateway allows you to deliver and accept direct payments without the typical fees related to credit cards and wire transfers. Plus, invoices and other documentation becomes completely digital.
  • Enjoy eChecks. Why wait around to transfer money from one bank account to another when an eChecks transaction gives you the opportunity to rapidly deliver funds instead? Gone are the days of relying on physical checks; worrying about whether a payment arrived in the mail, or if a check bounces at cash out becomes a thing of the past with immediate funding via eChecks.
  • Instant funding no matter what. Money transferring methods have never been easier. Transend Pay’s Merchant Payment Gateway allows you to deliver instant, secure funding via Visa and Mastercard credit networks whenever necessary, with minimal processing fees.

Getting started with Transcend Pay’s Merchant Payment Gateway is a simple process.

  • No reserve requirements. 
  • No hidden processing fees.
  • Minimize risk with our extensive banking network.
  • Accept and deliver payments quickly and easily.
  • We approve 99% of high-risk merchant accounts.
  • Same-day pre-approvals.

Are you ready to get started? To learn more about how our innovative merchant gateway technology can help to transform your business and help your high-risk merchant account mitigate credit card chargebacks, contact our team today for a free quote.

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