The right guidance to help you grow

How to Avoid Chargebacks

The term chargeback seems to be taken out of a game of Truth or Dare. While this comparison might have brought a smile to your face, its actual meaning has certainly made it disappear. There is good news heading your way, at some point, so you need to prepare to take the veil of disappointment off.

Here is the thing. While you cannot get rid of chargebacks completely, as these are in the nature of all eCommerce businesses, you can, however, avoid them from affecting your business too much. Lowering the chargeback rate is a gain in itself. Yes, you’ve guessed it. This is part of the good news you’ll be receiving in this guide, as the rest is a batch of strategies you can actually use to accomplish this goal.

Chargebacks, by definition, refer to a dispute between you and your customer. More specifically, a customer can contact the credit card issuer and dispute a charge to their account. You are given the chance to defend that charge. However, should you fail in your attempt to adequately defend it, you will need to restore that charge to the customer, plus cover additional fees, also known as chargeback fees. A lot of pressure, right? Not to mention the harm chargebacks can do to your company’s reputation.

Again, while chargebacks cannot be avoided completely, you can lower their number and manage an accepted chargeback rate. Yes, there is such a thing as an accepted chargeback rate. Otherwise, all business owners would go insane trying to cope with the chargeback rate.

Chargebacks have been called the friendly fraud, because of the damage, they can do to your brand on the long-term. Being proactive when handling this situation will help you in lowering the rate. As always, prevention is key.

So, let’s see how we can deal with chargebacks.

Understand the causes to find a solution

It’s simple to sit in a comfortable chair, have everything you want at the tip of your fingers and comment on how the world works. Not everyone wants to get their hands dirty, right? Unfortunately, things don’t actually work that way. To have solid strategies that function effectively, you need to understand the nature of your chargeback. What is causing chargebacks to appear? Can you find the most common causes? We have managed to identify several of them, and they seem to be rather popular.

  • The refund never actually arrives: Refunds are a pretty sensitive matter for customers. If you have agreed to offer a customer a refund and it doesn’t go through, you should expect a chargeback.
  • Authorization problem encountered: The customer is surprised to see that a charge went through, even though the payment authorization failed.
  • Automatic renewals: Some customers might not be on the same page with you when it comes to automatic renewals.
  • Double the charge: The customer has been charged twice for the product.
  • Fraud: The customer does not recognize the charge.
  • The order has not been fulfilled: After making the payment, the customer did not receive the product or cannot access it.
  • Product wrongly advertised/ does not function: The customer pays for the product, receives it, accesses it, but this does not function at all or it works differently than expected.
  • Canceled recurring transaction or installment billing dispute: The subscription has been terminated as a result of the client’s request, but a payment had already been processed before the request was made.

Now that we have the causes, let’s jump to solutions!

Solutions to lower chargeback rates

Details, details, details

It is very important to cover everything in the cart, from the details about the product to those regarding pricing. As we have mentioned before one of the causes for which entrepreneurs keep getting chargebacks is that they have not said yes to automatic renewals. Sometimes, they might have agreed to something without even knowing, as they hadn’t noticed your initial message. Other times, they might have forgotten about it. Either way, you will be the one fighting chargebacks, so, at the end of the day, it really doesn’t matter whose fault it is.

The bottom line is this. Offer as many details as possible and make absolutely clear what you are offering, what the product is if there is automatic renewal involved or not, everything. Secondly, you could use notifications to get this automatic renewal over and done with. You can send the client a simple message regarding the status of his subscription and inform him that he has agreed for automatic renewal. Make sure you also tell your client that he will be charged prior to the expiration date. You might think that everything here is redundant and you hardly see the point of all this work. Because if you wanted to dispute the chargeback, you could easily win. You would win the dispute, but you would be losing other resources throughout the process.

Complete product descriptions

OOne of the causes of chargebacks is the fact that after making a purchase, the client discovers that the product is not exactly what he had thought or what he needed. Unfortunately, you cannot convince a customer that he can use it after the purchase has been made, which is why you need to be proactive about this sort of things and explain beforehand what your offer actually is. Go as far as you think it is necessary. Add screenshots, demos to your product description, if possible, as well as any other pieces of information you think would help the customer understand the product better.

Indeed, these refer mainly to the overall functionality of the product, but if there are other details you think the client should know, something perhaps related to price, go for it. Don’t hold back on anything. It is always better to give more information than less.

It’s really all about anticipating problems. When you offer a small amount of information regarding a product, your customers might make blind purchases. And quite frankly, no one likes returns. They are messy and complicated and most of the times they lead to other problems.

Flawless customer service

Customer services really do make the world go round. Let’s face it, we would be lost without it. When talking about retention, we did mention that customer service is the kind of tool you want to keep in close reach. So why would chargebacks be any different? After all, your endeavors to make clients reconsider chargebacks is really just another form of retention, right? So, why wouldn’t a solid customer service help?

Well, we’re here to tell that not only does it work, but it also makes wonders. It is a real life savior! Customers may stumble into all sorts of messy situations. And not that they instantly ask for their money back, but they are not exactly patient.

The first rule is to make your customer service visible. You might go through the trouble of training your team. If so, you need to let everyone know that you have exceptional customer service and anyone can reach it with great ease. Advertise this feature on your website in as many places as you can. If possible, try to add your contact in the order confirmation emails or newsletters. It’s not only polite but in this case, it’s actually very good for business.

Be quick to answer all inquiries and requests and make sure that you treat your audience respectfully. You need to make sure that your clients receive the best treatment both before and after the purchase.

Sometimes chargebacks are the result of miscommunication and a really bad customer service. The customer feels like he has been ripped off and there is no one he can ask for help. Make sure this doesn’t happen to you.

Deal with inactive accounts the right way

Surely you have customers that have been with you for a long time. And surely, you have noticed that among them, there were those subscribers who haven’t used the account for a very long time. You are still charging the client. We know, it’s just another case of recurring revenue, so why bother right?

Well, at one point or another, one of those clients is going to wake up, notice the charge, have no clue where it came before, as he has forgotten the subscription and boom, you have one extra chargeback point to add to that rate. This is not something you want. It can’t be.

So, again, be proactive, take the initiative. Tell that customer that he has the auto-renewal activated and maybe he would like to actually use the product. Well, maybe you don’t want to tell your customer exactly this, but you should still approach him.

In these kinds of situations, it’s just a chargeback waiting to happen. So, why not take action? If you do this, not only will you be avoiding a chargeback (this could be the only existing scenario in which a chargeback could be completely avoided), but you would also earn points in terms of brand reputation.

Self – service features

In some supermarkets, clients can go to paying machine and do without the cashier. They can scan, bag, pay the products on their own, without any help from anyone. They are that independent. You want this kind of independence or more specifically, this kind of transparency. Offer your customers control over their orders and allow them to make different changes on the status of their account, disable auto-renewing subscriptions, modify payment details.

It is very important to show your customer that they have your full support, you are there to make things easier for him, but you are also giving him the freedom he needs. Making this change will provide you with so many benefits and not just in terms of chargebacks. Your work will be significantly simplified. And you will only have to deal with customers that have a real issue and cannot figure out a way to sort it out.

Be transparent about your refunds

As a concept, chargebacks were developed to protect the customer from fraudulent purchases. Therefore, you should know that policies in this respect are made in favor of the client. While this might not surprise you, it should tell you that if you are going to dispute something, arm yourself with patience and a lot of information. In terms of refund, you might want to treat it carefully. When a client feels like the product has been poorly advertised and it is not what he was looking for or that it does not function appropriately, he will ask for a refund. Your attitude towards this situation should be a relaxed one, complying with the request and providing the client with the proof of the refund made, as well as details regarding it. When a client feels like the product has been poorly advertised and it is not what he was looking for or that it does not function appropriately, he will ask for a refund. Your attitude towards this situation should be a relaxed one, complying with the request and providing the client with the proof of the refund made, as well as details regarding it.