In-store or online, chargebacks happen to merchants. However, when it comes to doing business online, there are some specific tactics you should use to help avoid and manage chargebacks.
Why chargebacks happen online
As with in-person payments, chargebacks happen to online merchants for a variety of reasons. Here are some of the most common reasons:
- Charegeback fraud. The customer claims he or she did not authorize the transaction and someone used the payment card fraudulently.
- Goods not received. The customer claims he or she never received the delivery of the goods ordered on your eCommerce website.
- Dissatisfied with goods. The customer claims the goods received were not as advertised or do not meet the expected quality standards.
How to avoid fraud-related chargebacks
Your first line of defense against chargebacks and their associated cost and damage to your reputation is to stop them from occurring in the first place. When it comes to the chargeback process, you need to work hard every day to stop fraudsters in their tracks by being vigilant about the signs of potential fraud. Here are some “red flags” to watch out for that could mean fraud is occurring:
- International IP address. Certain countries and regions have been identified as “high risk” for fraudulent purchases, so pay close attention if you receive orders from these areas—especially if you have not previously gotten such international business.
- Multiple purchases on same card. If you receive multiple orders over a short period of time from the same card, it’s probably worth considering if a fraudster is making illegal purchases with a stole card.
- Multiple purchases from the same IP address. Similar to the above situation, if you receive multiple purchases from the same IP address over a short period of time, it could be an indication of fraud.
You should also work to combat fraud in your online store by requiring your customers to provide authenticating information prior to processing a transaction. Every time you take a credit card payment, you should require:
- Complete billing address
- CVV code
- Expiration date
How to avoid other types of chargeback disputes
One of the best ways to arm your business against other types of chargebacks is by keeping good records. You should always keep detailed logs of sales, which include date, time, IP address (internet location), card number, billing address, goods ordered, etc. By doing your due diligence to collect authenticating information such as the billing address and CVV code, you are helping to ensure that the person ordering from your online store is a legitimate user of that payment card. That way, if the cardholder comes to your business presenting a chargeback, you can prove that you collected as much information as possible to verify the legitimacy of the transaction.
To avoid goods-not-received type chargebacks, you should always—especially in the case of high-dollar orders—ship with tracking numbers and signed delivery confirmation. When you use a shipping method that requires an adult signature upon delivery of the package, you can go back to that signature in the future, if needed, to prove that the goods were received and accepted at the delivery address provided by the customer.
What to do when faced with a chargeback
How you approach a chargeback obviously depends on the individual situation. However, you will always be prepared to respond to the chargeback if you have kept good records and required authenticating information at the time of purchase as detailed above. When you receive a request for information related to a disputed transaction, make sure you respond quickly and within the required timeframe—or you risk forfeiting the claim.
It’s worth noting, however, that sometimes it’s better to just let the transaction be “charged back” to your business. When a loyal or long-time customer brings a chargeback to your business claiming he or she is not satisfied with the goods or services received, it may be in your best interest to just let the chargeback go through. In the interest of good customer service and hoping to maintain that customer relationship, sometimes you should consider “taking the fall” for a chargeback transaction, even when doing so may go against your standard protocol. Read more for informaiton on dealing with chargebacks as an eCommerce merchant.