Preventing Chargebacks After the Sale

All of the pre-sale and point-of-sale methods for chargeback reduction still cannot guarantee that a merchant will not experience problems.  As such, it is important for merchants to remain vigilant even after a sale is processed.  There are a few things merchants can do to continue to protect themselves after a sale is made.

Provide Status Updates

If an order does not allow for immediate delivery of a purchase, a merchant should be prepared to provide regular status updates to his or her customer.  This is particularly true in cases where items ordered were temporarily out of stock or in service-related fields where a project may not be completed for some time.

By remaining in regular contact with a customer, a merchant increases the customer’s sense of security in the transaction and can prevent them from launching a “cold feet” or “buyer’s remorse” chargeback prior to completion of the order.  Those customers who do not get regular updates in these situations may begin to legitimately question the status of their transaction and chargebacks in these circumstances are understandable.  A few simple updates regarding the status of an order can save major headaches for a merchant.

Handle Customer Interactions with Chargebacks in Mind

Many times, a merchant will have post-sale interaction with a customer and will consider the sale over and the deal completely done.  They fail to recognize that chargebacks can occur well after an actual sale is processed and occasionally engage in communication that spurs consumers to act rashly.

This does not mean that one must be overly accommodating to customers who may be considering a chargeback or disputing their bill.  In many cases, taking a hard-line in negotiations can prevent would-be cheaters from following through with their plans. 

One internet entrepreneur illustrates this clearly.

“I had a customer who was threatening a chargeback.  She claimed she didn’t make the purchase at all.  When confronted with the fact that the code on the back of the card matched up and that I had her correct address, she backed off a little.  I explained to her that if she persisted, all of that information would be relayed to the credit card company.  I told her that it sure looked like she had made the purchase—and if it wasn’t her it must have been someone else who knew an awful lot about her.  Maybe a family member or a friend.  I told her that I wouldn’t give in to a chargeback attempt easily and that I’d make sure a full investigation was made.”

This hard-line approach worked.  “After hearing that, she changed her tune.  She indicated that it must have been her husband and that I didn’t need to worry about the whole thing. I don’t know if the information I had opened her eyes to the fact that someone at her place made the buy or if my approach just convinced her it wasn’t worth trying to wriggle out of the purchase.  Either way, the threat of chargeback disappeared.”

This story not only illustrates the potential power of taking a serious attitude toward those who are attempting to effectuate a chargeback.  It also underlines the importance of acquiring good information (in this case a CVV2 code and using AVS) in order to prevent chargebacks after a sale.

When discussing matters with customers who may be contemplating a chargeback, the merchant must be firm and protective of his or her self-interests.  That does not, however, mean that the merchant should act in any way that would upset a customer.  Too hard an approach can actually encourage a chargeback.

Like any other negotiation, dealing with dissatisfied customers requires “people skills” and a clear understanding of one’s objectives.  When conducted appropriately, these interactions can result in avoiding chargebacks.

Act quickly

It is easy to let a chargeback notice fade into the background.  If one is busy and business is good, a single chargeback may seem to be a low priority. However, one must remain cognizant that a successful chargeback effort can result in additional fees and that too many chargebacks can create the backbreaking hassle of losing a merchant account completely.  Thus, it is important to take every chargeback seriously and to deal with them promptly.

The exact timetables for handling chargebacks varies based on the merchant account provider and credit card company involved.  Regardless of time limits, merchants should respond to any chargeback immediately and should provide all available documentation.  Most of the time, the merchant will be given an opportunity to provide any other relevant information.  If this is the case, one should provide a synopses of the transaction and timetables involved in writing and attach it with the other documentation and forms required.

A merchant should take chargebacks seriously and approach them professionally and quickly.  Hesitation will not only draw out the process, it also creates the opportunity to forget to deal with the situation.  For a busy online businessperson, this could conceivably result in completely forgetting the matter and missing out on the opportunity to dispute the customer’s claims. 

Refund when Necessary

If a merchant has the opportunity to deal directly with a customer prior to the initiation of a chargeback, they should remember that a refund might be less costly than a chargeback.  One can usually void a credit card transaction far less expensively than allowing it to fester and turn into a chargeback.  Although processing services do not like refunds or voids, per se, they are generally less despised and penalized than chargebacks.

If one is dealing with a completely obstinate customer who is obviously unwilling to yield, the merchant should consider making a refund prior to allowing the matter to escalate.  This can be difficult for many merchants who simply cannot stomach the proposition of losing money and would prefer to make a stand on the matter until the “bitter end.”  However principled that position may be, it often makes less sense in financial terms than simply voiding the transaction or issuing a refund.

Issuing a refund makes great sense in those situations where fraud is a likely scenario and the cardholder is unlikely to have been the actual purchaser.  One should be prepared to offer a pre-chargeback refund when indicators point to a likely case of fraud perpetrated by someone other than the cardholder.

As hard as it is to give money away, merchants must remember that the decision to refund a customer’s money will likely be far less costly (and fraught with far less risk) than pushing the matter to the point where a chargeback is pursued.