How to avoid chargebacks: Unique tips to implement it effectively

Until now, chargebacks have always been an obsession for online businesses because of the many consequences they bring. So, how can we avoid chargebacks? If you are having a headache searching for ways to prevent and solve chargebacks, you’ve been to the right place. Because in this blog, Arrowtheme has compiled the most common cases of chargebacks and suggested you unique tips about how to avoid chargebacks. Then, let’s explore them right now!

What are chargebacks?

When a cardholder requests that a credit card transaction that has been issued to their account be reversed, this is known as a chargeback. In fact, maybe many people don’t know, a chargeback is different from a refund in that the money is returned to the merchant directly, whereas a refund is handled by the card issuer. What’s more, customers may request a chargeback for a variety of reasons. Below are a few of the most common ones:

• Consumers haven’t receive the goods or services.
• The product or service description was not correct.
• During transportation, it makes the merchandise damaged or lost.
• Next, duplicate billing
• Billing on a recurring basis was not cancelled as desired
• Technical error
• Finally, Fraud. 

Some of the above scenarios, such as missing or damaged products during shipping, are unavoidable. However, others, including billing problems, should be avoided by following sound business standards and exercising due diligence.

Consequences of chargebacks you must know

Unluckily, a chargeback claim made against your company is never a good thing. So, if you don’t fix it, the implications could be disastrous for your company. Cost and damage to your company’s reputation are the two main consequences. Let’s explore which they are below.

#1. Lost profits

One of the most evident effects of a chargeback is revenue loss. In short, you should minimize the occurrence of chargebacks because even if a merchant prevails in a chargeback dispute, a nonrefundable fee of $20 to $100 is charged from the merchant account for each chargeback filed. In many cases, the merchant is also responsible for covering shipping charges and reimbursing the cardholder. 

#2. Negative impact on the reputation of the merchant

In addition to lost revenue, chargebacks also cause a negative impact on the merchant’s impact a lot. Because it will make banks and card issuers have a bad perception about your business. What’s more, even if you win the issue, a chargeback is bad for business. If you have many claims filed against you, there will be a monitoring program controlling you, which will cost you even more money.

Not only that, merchants that do not cut down their chargeback rates may face higher processing fees or have their accounts suspended. Also, those who engage in frequent forced payment reversals may be added to the Terminated Merchant File. As a result, your business will appear in a five-year blacklisting.

How to avoid chargebacks effectively?

Depending on different reasons, chargeback will be avoided in different ways. Now, we will instruct you how to avoid chargebacks according to each case.

1. Fraudulent 

Fraudulent also means consumers don’t authorize the charge. In reality, it is the most common reason for a chargeback in case they lost the card or stolen. Then, you can prevent chargebacks in this scenario like: 

• Ensure that the text on your billing statements is easily recognizable by your customers. Customers will recognize your store’s name or domain name on their credit card bill if you use it. Besides, you can change the billing statement text from the Shopify admin if you’re utilizing Shopify Payments.
• Send receipts to your consumers when they pay to remind them of what they paid for.
• Consider only shipping products to orders that pass an AVS check if you’re shipping physical goods to the US, the UK, or Canada. Before sending to an address that fails an AVS check, you could potentially contact the consumer.

2. How to avoid chargebacks in case of Unrecognized?

For more detail, when having Unrecognized means on the card statement, the customer doesn’t identify the merchant name or location. So, you can respond to this in the same manner you would to a phishing scam.

Specifically, if you face this case, let’s set the billing statement that displays on your customer’s credit card statement. Then, set it to your store’s name or URL so that the buyer can remember what they bought. Moreover, you are able to alter the billing statement text from the Shopify admin if you’re utilizing Shopify Payments.

3. Duplicate

Duplicate is the case that you overcharged for the same item twice. So, if a double charge occurs by accident, you should immediately refund the second payment and call your customer to explain the situation.

4. How to avoid chargebacks on case of Subscription canceled?

Coming to the fourth sencio you can meet the chargebacks – Subscription canceled. You charged for a subscription that should have been canceled, according to the consumer. It could also indicate that the consumer anticipated receiving a notification prior to each recurring transaction but did not receive one. Then, you should prevent chargebacks in this ways below:

• When a consumer requests it, terminate their subscriptions right away and send them an email confirmation.
• Make it crystal obvious on your sign-up page that your consumers are committing to a recurring charge, and that you will email them a notice before each charge.
• On your website, include a cancellation policy for subscriptions.

5. How to avoid chargebacks in case of Products not received? 

In this case, customers don’t receive the products or services. So, you must avoid chargebacks by: 

• Firstly, after receiving payment for an order, ship things as quickly as possible.
• Estimate shipment and delivery dates as precisely as possible, or provide your customer with shipping firm tracking information.
• Besides, if your shipment delays, call your customer and explain what’s going on with their order.

6. Product unacceptable

Although customers receive goods, they were defective, damaged, or not as described. So, in order to prevent chargeback, you must:

• Firstly, ensure your product or service’s photographs and descriptions are clear and accurate.
• Next, if you’re shipping real things, make sure you pack and ship them in a way that protects them from harm while in transit.
• Respond to your customers swiftly and repair any products that are defective or damaged.

7. Credit not processed

You received notification from the consumer that the purchased item was returned or that the transaction with you had been terminated, but you have yet to refund or credit the customer. So, how to avoid chargebacks in this case?

• First and foremost, you must make your return policy clear and easy to find on your website.
• Moreover, ensure to give refunds as soon as feasible.

8. How to avoid chargebacks in the instance of General? 

Last but not least is General. Unlike the majority of chargebacks, this one doesn’t fit under any of the previously mentioned categories. Hence, the advice we suggest for the other chargeback causes may still be useful for this case. 

In conclusion

To sum up, as you can see, chargebacks are a huge threat to any ecommerce business because it will result in a lot of terrible unexpected consequences. So, preventing chargebacks is one of the most important things you must pay attention to to protect your business. In this blog above, Arrowtheme instructs you how to avoid chargebacks effectively with many unique tips. We hope you can adapt it successfully for your business.

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