Chargebacks: What they are & how to avoid them

“A Chargeback is the return of funds to a consumer…forcibly initiated by the issuing bank of the instrument used by a consumer to settle a debt…The chargeback mechanism exists primarily for consumer protection.” (http://en.wikipedia.org/wiki/Chargeback)

In a nutshell, a chargeback is bad news, and their reasons for occurring can vary. Maybe someone purchased a model car off your website using a stolen credit card.  Two weeks later, after you have received payment and shipped the product, that cardholder is on the phone with their bank saying that they never authorized that purchase and have no interest in toy cars. The bank is then going to take back those funds from you and return them to the cardholder. You’re left empty handed with no payment and no product. You have also more than likely received a $20 – $30 chargeback fee.

There are also instances when the chargeback is not fairly initiated. This could be a situation where a cardholder has just spent a week in your vacation rental. Now they are going to their bank and claiming that it was dirty and they deserve their money back. You’re shocked to hear this, because your housekeeper was there the day before the cardholder arrived.  You have the option to fight this, and potentially win. Providing evidence, like receipts and invoices from your housekeeper, would help you with your case. Unfortunately chargebacks are a huge hassle, even if you win.

Now that we understand what they are, how can we avoid them?

  • The most basic and essential way to avoid chargebacks is to be honest. Make sure that you accurately describe your product and have clear images on your website. Your Terms & Conditions should make sense, and your Return Policy needs to be clear.
  • Provide updated contact information on your website, as well as your receipts. It is not unheard of for a cardholder to try to contact an out of date phone number regarding a return, and launch a chargeback when they are unable to reach you.
  • Also, make sure that your website URL matches your business name. When the charge on their statement is coming from a business name completely unrelated to the website they made their purchase on, they may attempt a chargeback.

Following those steps will decrease your chances of receiving a chargeback. However, there will always be the risk of stolen credit cards and dishonest cardholders.

*If you are struggling with a chargeback, reach out to your sales representative or our technical support at 888.277.3332.

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