Handling Chargebacks is Easy: Just Do These Five Things

Handling Chargebacks is Easy: Just Do These Five Things

By In Information On April 6, 2016

What to Do First if You’re Looking to Tackle Your Chargeback Challenge

Received a few chargeback notifications lately? Your first reaction may be to panic, followed quickly by despair at the realization that you don’t know anything about handling chargebacks. You might even believe that there is nothing merchants can do about fighting or preventing chargebacks.

However, that is far from the truth. When confronted with chargebacks, merchants do have a recourse. Instead of chalking the chargeback up as a cost of doing business, here are the steps to take which will help you deal with the next notification you receive.

Step 1: Check Your Bank Account

Verify that your account always has enough operating funds to manage the business and pay employees, separate from the amount susceptible to chargebacks. If there will be cash flow issues, take steps to secure additional needed funds to prevent the business from experiencing setbacks and delays.

As a merchant, letting chargebacks mount up unopposed can wreak havoc on your finances.

Step 2: Find Out the Cause of the Chargeback

One common reason merchants fail to dispute chargebacks is the assumption that chargebacks are always the result of criminal fraud. After all, why bother disputing a transaction if the cardholder is the victim of indisputable criminal fraud?

The problem with that line of thinking is that, despite the reason code attached to the chargeback, the vast majority of chargebacks are not criminal fraud.

There are actually three potential causes of chargebacks:

  • Merchant Error: Sometimes a merchant makes an honest mistake, or the merchant’s practices and policies are not customer-friendly. When this is the case, chargebacks can result.
  • Criminal Fraud: The original purpose of chargebacks was to protect consumers against fraud. If criminal fraud occurs, the cardholder will most likely request a chargeback.
  • Friendly Fraud: When seemingly legitimate customers request a chargeback, it is referred to as friendly fraud.

Understanding why the chargeback was issued can help you prevent more from happening in the future. Additionally, it will help with handling chargebacks now through a process known as representment.

By examining the reason code given for the chargeback, merchants can determine exactly how best to dispute that chargeback. Each representment is an opportunity for merchants to recoup their lost revenue and preserve their reputation with the bank.

Banks have established a ‘no-fault’ method of maintaining customer satisfaction, allowing cardholders to call in and dispute charges easily. Unfortunately, reversing a chargeback is not as simple. Merchants must be aware of the specific process each card network uses, as well as know the timeline that must be followed to file representment.

Network policies change frequently, requiring merchants to constantly monitor current procedures. Not only must the merchant be aware of the card network policies, they must craft a written response providing verification to the authenticity of the transaction.

Step 3. Use the Chargeback as a Learning Experience

Unfortunately, if a chargeback is the result of merchant error or criminal fraud, there is not much you can do about it; however, it’s not all gloom and doom. While no merchant looks forward to receiving chargebacks, you can take it as an opportunity to learn and develop business best practices.

If the chargeback was caused by merchant error, take this opportunity to review your business’s policies and procedures. What changes can be made to create a more effective transaction processing system and a more customer-friendly experience?

In order to prevent future chargebacks, merchants can utilize various practices, tools and services to reduce the likelihood of additional fraud occurrences.

Step 4. Focus on Prevention

When it comes to chargebacks, the best offense is a good defense. You should develop a prevention strategy that will encompass all three chargeback sources in order to prevent future chargebacks.

Contact us today if you’d like help developing a workable chargeback mitigation plan. We can show you how best to handle cases of friendly fraud, as well as insulate yourself against criminal fraud and merchant error.

Step 5. Find an Expert

The complicated process of handling chargebacks and representment doesn’t have to overwhelm merchants. Instead of trying to wade through it alone, merchants can save themselves the time and resources, as well as the headaches, by turning the battle over to a chargeback expert.

The effectiveness of in-house chargeback management is limited. By outsourcing to a professional, you’ll see significant improvements to the business’s bottom line.

Contact us today if you’d like to learn more about the professional chargeback management services that are available.