How to prevent chargebacks as a merchant?

Prevent chargebacks as a merchant

Tuesday 14 February 2023, 4 minute read

Chargebacks can be a significant problem for businesses, particularly those operating in the e-commerce space. Not only do chargebacks result in a loss of revenue, but they also disrupt the customer experience and can harm a company's reputation. 

In this article, we'll explore ten ways you can prevent chargebacks as a merchant, and protect your business from the associated costs and headaches.

What is a chargeback? 

A chargeback is simply when a customer gets their money refunded after they dispute a payment made with a card. This might happen if they feel like the payment was made fraudulently, they didn't get the services they paid for, or they never received the goods or services they ordered. 

On the other hand, chargeback fraud is when consumers fraudulently attempt to secure a refund using the chargeback process.

Both chargeback fraud and chargebacks can cause hassle for businesses across the UK, but the good news is they’re avoidable with the right prevention strategy in place. Just follow our ten simple steps to prevent chargebacks and chargeback fraud as a merchant: 

How to prevent credit card chargebacks

Offer clear and concise product or service descriptions

One of the most common causes of chargebacks is when a customer disputes a transaction because they didn’t receive what they expected. To prevent this from happening, it’s crucial to provide clear and concise descriptions of your products or services. This includes any restrictions, limitations, or conditions that may apply.

Receive customer payments via an account-to-account payment service 

One of the most important steps in preventing chargebacks online is ensuring the security of your checkout process. This includes using secure payment methods and implementing measures to detect and prevent fraudulent transactions and the resulting chargebacks.

Perhaps the most effective way to avoid chargebacks entirely is to use an open banking platform to receive payments quickly, safely and directly into your bank account. There’s no way to eliminate the risk of chargebacks when you use services like Paypal to receive customer payments. But when you collect payments with an account-to-account payment service like Crezco (which doesn't rely on cards), for example, you eliminate all risks of card fees and chargebacks.

Crezco eliminates all risks of chargebacks

Simply connect your business bank account to Crezco only once and create payment links manually or add a “pay now” button to your invoices with the platform’s accounting software integrations.

You’ll benefit from receiving both domestic and international payments securely, while Crezco’s proprietary machine-learning risk system protects your business from fraudulent payments and illicit transactions at no extra cost.

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Use clear and noticeable terms and conditions

Another reason customers may dispute a transaction is if they are unaware of the terms and conditions of the purchase. To avoid this, ensure your terms and conditions are clear, noticeable, and easy to understand. You can place them on your website, in your checkout process, or even on your receipts.

Provide excellent customer service

Providing excellent customer service can go a long way in preventing chargebacks. By being responsive and helpful to your customers, you can resolve any issues they may have before they escalate into a chargeback. Your contact and customer support information should be easy to find on your website (if you have one), and you should proactively encourage customers to reach out to you if they have any questions or concerns.

Be proactive in resolving disputes

When a customer does get in contact with your team about an issue - or potentially raises a dispute - it's crucial to be proactive in resolving it. 

This may involve offering the customer a refund, providing additional information, or even negotiating with the customer. By resolving disputes quickly and effectively, you can prevent them from becoming chargebacks.

Regularly monitor your transactions

Monitoring your transactions regularly can help you identify any potential fraud or disputes before they become chargebacks. You can use tools like transaction reports or alerts to keep track of your transactions and identify any unusual or suspicious activity.

Provide receipts and invoices

Providing receipts and invoices for transactions can help you demonstrate that a customer has agreed to the terms and conditions of a purchase. This can be especially useful in the event of a chargeback, as you can use the receipt or invoice as evidence in your dispute.

Keep accurate records

As well as ensuring your customers have their receipts and invoices to hand, keeping your own accurate records of your transactions - including customer information and the details of each purchase - can help you respond to chargebacks quickly and effectively. 

Particularly when they’re ordering from you in bulk, always encourage your customers to send remittance advice with their payment - or request payment using a Crezco account-to-account direct payment link, meaning you’ll be notified by email when your invoice is paid, and automatically receive remittance advice. 

You can use this information to refute fraudulent claims or provide evidence of a customer's agreement to the terms and conditions of the purchase.

Offer refunds or returns

Offering refunds or returns can be an effective way to prevent chargebacks. By giving customers the option to return a product or receive a refund, you can resolve any disputes before they escalate into a chargeback. 

Plus, a generous refund or return policy can boost customer satisfaction and loyalty.

Work with a chargeback prevention service

Finally, you do always have the option to work with a chargeback prevention service to help you manage and prevent chargebacks. These services offer a range of tools and strategies to help you reduce the risk of chargebacks and protect your business from the costs and headaches associated with them.

However, do keep in mind that these chargeback prevention services will come at a price - and that working with them won’t be necessary in the first place if you are using a secure payment method to eliminate all risks of chargebacks when collecting payments from customers. 

Final thoughts

In conclusion, chargebacks can have a significant impact on businesses, but they can be prevented. By implementing the ten strategies we’ve outlined above, you can massively reduce the risk of chargebacks as a merchant

Remember, the key to preventing chargebacks is being proactive and taking the necessary measures to reduce the risk of disputes. When you start receiving account-to-account payments quickly and securely with an open banking solution like Crezco, you’ll be well on your way to minimising any risk of credit card chargebacks. 

Add great customer service, clear terms and conditions and accurate product descriptions into the mix, and you’re well on your way to improving customer satisfaction, eliminating chargeback fraud and delivering a five-star customer experience.

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