Seven ways to reduce chargebacks
What are chargebacks and why do they happen? And how do you the likelihood of chargeback requests?
Chargebacks were originally introduced as a means to reassure customers when making card payments. But they have become time-consuming and costly for businesses to deal with. Fortunately, there are ways to reduce the likelihood of receiving chargebacks, as well as minimising the time, effort and cost of handling the chargebacks your business does receive.Read on for seven useful ways to safeguard against chargebacks.
What are chargebacks?Chargebacks were designed to add protection for debit and credit card users, allowing them to easily get their money back if something was never delivered, if they weren’t refunded promptly, or unexpected charges were added to the transaction.They were intended to encourage consumers to use cards when card payments were a new payment method, and incentivise card acquirers to onboard reputable merchants.Specifically, a chargeback is the reversal of a debit or credit card payment. Unlike with normal refunds, where the customer is the party requesting a refund, in the case of a chargeback, it’s the customer’s bank that takes the money on the customer’s behalf.For example, a customer might receive faulty goods from a merchant. If they are unable to get a prompt refund from that merchant, they can raise a chargeback dispute with their bank or card issuer, who can then reverse the charge at the merchant’s expense.Reasons that a customer may request a chargeback include:
- card processing errors, such as being charged multiple times for the same purchase
- the cardholder doesn’t recognise the transaction
- merchandise or service differs from the description
- received goods are defective
- ordered goods aren’t received
- agreed upon services did not take place
- the seller has gone out of business, and so the customer cannot request a refund