Chargebacks are an unwelcome but inevitable aspect of running a business. They occur whenever customers initiate refunds from their end, either due to:
- Unauthorized use of stolen credit card data — i.e., traditional fraud.
- Disputes over legitimate purchases — i.e., “friendly fraud.”
Either way, your business will likely have to cover the dollar amount of each refund and the chargeback fees your merchant service provider will levy. Yet you must also factor in the additional cost of:
- Bank-initiated investigations
- Time spent disputing each chargeback
- Penalties — and in some cases — litigation
The damage doesn’t stop there, however.
According to Merchant Council, businesses with a chargeback ratio above 1 percent are often deemed “high risk,” making it harder for those merchants to qualify for attractive processing rates.
This problem is especially pronounced in the e-commerce world where anonymous shopping is the norm. Because it’s difficult to verify the authenticity of every buyer, card-not-present transactions are more susceptible to chargebacks stemming from legitimate and friendly fraud.
How Do You Limit the Frequency and Severity of Chargebacks?
Again, chargebacks are an unavoidable part of business, and it’s impossible to eliminate them completely:
- There will always be customers who take advantage of your company.
- There will always be criminals who take advantage of your customers.
Though with the right knowledge, it’s possible to reduce the frequency of chargebacks within your business.
The following white paper provides proven strategies for minimizing your risk and protecting your bottom line. This free resource also outlines how to limit the damage if and when chargebacks do occur.