Earning potential, flexible schedule, personal fulfillment — there are many advantages to running your own business. These advantages, however, come with their own set of challenges that can throw plenty of curveballs down a merchant’s path to success. One of these challenges is chargebacks. Let’s discuss what they are and what you can do about them.
Know Thy Enemy
The first step to solving a problem is being aware of its existence, and chargebacks are something that’s painfully well-known to most businesses. In case you’re fortunate enough to have never experienced them, here’s a quick definition:
A chargeback is the reversal of a credit card payment based on a transaction dispute.
The keyword here is dispute because usually all it takes for the customer to get their money back is to report the charge to their bank. Sometimes it’s because the transaction is fraudulent (something that chargebacks were invented to protect from in the first place), but too often it’s because the customer doesn’t know better.
Many chargebacks that aren’t caused by fraud but simply result from the dissatisfaction with the purchase can typically be avoided by contacting the business directly and requesting a refund. Unfortunately, many customers prefer to go the bank route instead. Whenever it's done intentionally and without a good reason, it can be considered “friendly fraud”.
The reasons behind friendly fraud can range anywhere from the customer forgetting that they made the purchase, to them wanting to get it for free, since the customer is under no obligation to return the product associated with the chargeback.
The burden of fighting chargebacks falls on the merchant’s shoulders. Not only is it time-consuming and stressful but it also doesn’t guarantee success, as only 18 percent of businesses win most of their chargeback disputes.
This is the case when prevention is better than cure. As a merchant, you need to avoid any potential reasons for customer dissatisfaction by offering timely customer service, delivering quality products and making secure payment processing a top priority.
Chargebacks cost money and, if they occur too often, can lead to highly unfavorable consequences for your business. Discover more ways you can avoid them with TransNational Payments!