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What is a Chargeback and Ways to avoid Chargebacks?

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The Chargeback protection process began in the 1970s, intending to protect consumers against charges from stolen cards or fraudulent merchants. Over time, the game altered as customers started to take advantage of merchants using this process. Although it is hard to eliminate chargebacks, there are strategies to avoid them. This post will go over preventative strategies in great depth.

What is a Chargeback?

A chargeback is a reversal of funds to the payer of the transaction, most typically a credit card transaction. Most of the times, the payer is a customer and the payment is reversed from a customer’s bank account, line of credit, or credit card. A credit card chargeback occurs when a client successfully rejects a transaction on their card. The payment is reversed, and the merchant is not compensated. Aslo, a chargeback fee is charged from the merchant. Though these complaints are legit in some cases, mostly it’s fraud.

Are Chargebacks and Refunds the same?

Well, to answer this question, let’s first know what a refund is. A customer who wants to return a product reaches out to the seller to initiate a refund. After verifying the reason, the merchant initiates the refund. The bank transfers the funds to whatever payment method (credit card, bank account) the payer initially used to make the payment. So typically, when disputing a transaction, there are two options: Refunds or Chargebacks. A retailer initiates the refund, whereas the card issuer issues a Chargeback.

Chargebacks take far longer to process and settle than refunds, despite the fact some customers file them out of convenience rather than dealing with the perceived bother of the refund procedure. They are usually paid in a few weeks, although it can take up to 75 days in some cases. On the other hand, refunds typically take three to seven business days.

Overview of how the Chargeback Process works:

Customers can use chargebacks to dispute dubious charges quickly and easily. However, the same factor that makes chargebacks beneficial to customers can also make them difficult for businesses. The procedure is simple. It’s so simple that customers will sometimes request a chargeback even if there is no fraud. The chargeback procedure consists of five steps:

credit card chargeback
  • A purchase or a suspected fraud dissatisfies the customer.
  • The customer reaches out to their credit card company to dispute the transaction, and the credit card company issues a chargeback.
  • The bank debits the disputed amount from the merchant’s account.
  • The bank notifies the Business.
  • The Business has a limited time to defend the bank chargeback, or the customer automatically wins the dispute.

Ways to Protect your Business:

While it’s hard to obliterate chargebacks entirely, lowering them saves money for the company and safeguards its reputation. Here are some strategies to lessen the number of chargebacks your business experiences.

A  clear, easy-to-understand return and refund policy

Many customers reach out to the credit card issuer directly since they find it easier to file a chargeback. Laying out a simple return policy shows the consumer that it’s easier and beneficial to contact the merchant first.

Make sure the website includes detailed product descriptions

Maintain transparency with the consumers as much as possible. Ensure customers understand what to expect from the product they are purchasing. Doing so not only avoids chargebacks but also improves the brand’s image.

Easy access to the company’s contact information

If customers find it difficult to contact your customer service personnel, they may file a chargeback. Let customers know if 24/7 support is available or the time frame in which they can contact you. Return all client messages as soon as possible to resolve any issues in-house.

Ensure your business account maintains a precise payments descriptor

Make sure all product descriptions on receipts include the name of the product or service and are clear and easy to comprehend. Clients should see the store name, the transaction date, and the amount on their credit card bills. Keep your particular records in addition to explicit billing descriptors. Keeping meticulous records might help later when required to defend a chargeback

Investigate the Chargeback occurrences

Take the time to investigate and analyze any chargebacks that may have occurred. Every person in your firm should know the payment regulations and follow them for each transaction. Above all, be cautious of any purchases made with credit cards that appear to be suspicious. Investigate the charge and validate its legitimacy before processing the payment.

Not A Rapidcents Merchant?

Every business that accepts credit cards is vulnerable to chargebacks. While Chargebacks are inevitable, why fight them when you can prevent them? So, if you are looking for a reliable payment processor, you need to check out Rapidcents. This platform offers online billing software, fraud prevention, and many more services. You will also receive 24×7 customer support. So, don’t you wait; visit Rapidcents today.

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