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A Lesson on Chargebacks

20 August 2020

Blog submitted by Sona


With more and more businesses feeling the pressure to showcase and sell their products through an online storefront, it is important to be aware of the dangers that lurk in the world of online sales. One of these dangers that can negatively impact your business is fraudulent activities and are commonly known as Chargebacks. Luckily, there are ways to mitigate this danger so your business runs a lower risk of falling victim from these types of activities.


What is a Chargeback?

A chargeback occurs when one of your customers disputes a transaction that your business ran through their credit card issuer. Sometimes it’s done by mistake because they didn’t recognize the charge, the product didn’t meet their expectations, the product was never received or other times their card might have been stolen and used at your place of business. Fortunately, if you do experience a chargeback, you will have the opportunity to defend yourself. But whether you are found at fault or not, the transaction amount will be debited from your bank account and could be held for months. If you are found to be at fault (due to not following the card network rules), the money will be lost.


How can a Chargeback impact your business?

It’s important to know the numerous ways a chargeback could negatively impact your business. These include:

  • The product or service is lost
  • There is a possibility your business could be fined a large fee
  • The revenue for the product or service could be lost
  • Lost time disputing the chargeback
  • Impact your business’s credit
  • Increase the fees you have to pay to process credit cards
  • Or impact your business’s ability to accept credit cards


How can you protect your business from Chargebacks?

Luckily, there are ways to help reduce the risk of experiencing chargebacks. These include:


Use a clear payment descriptor: Ensure the “Tradename” that you choose through the registry and that is given to the bank resembles your business name. If a customer sees an unknown name on their bank statement, they may call their bank to dispute the charge.


Deal with customer service issues promptly by follow payment processing protocol: 

  1. Ensure you require a CVV code
  2. Get AVS information


Verify suspicious orders:

  1. Series of decline orders with the same shipping address?
  2. Multiple orders from the same customer using different cards?
  3. Unordinary transaction size or number of items purchased?
  4. Does the billing address match the shipping address?
  5. Is the customer information that was provided properly formatted?
  6. Have you had prior chargebacks from a similar location or address?


Store all records of transactions and communications with customers: This will make it much easier to defend yourself against false claims.


Also remember to:

  • Provide tracking numbers and request customers to sign for delivery of goods
  • Provide clear and accurate product descriptions
  • Provide clear refund and cancellation policies


Chargeback prevention can be time and resource consuming for business owners. If you think you may have an issue with chargebacks, or you just need to get fraud protection off your plate, look into a fraud prevention solution like ClearSale. Having a team of fraud specialists as your partner will not only reduce or eliminate your chargeback rate, but it will also help you identify trends and areas of weaknesses, so that you can get back to running your business without sacrificing your customer experience.

Credit cards are becoming the most common form of payment and more and more businesses are accepting them in various ways. It is important to understand the risks associated with accepting credit cards and the precautions to follow to better protect your business. Take the time to put the proper measures in place to help reduce your business from incurring chargebacks.

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