Operating a business that is considered high risk can be a challenge in itself considering you are restricted to certain verticals disclosed by your high-risk merchant account provider. Any business that makes use of the services offered by a high-risk merchant account provider would also need to know that it is vitally important to issue refunds to avoid chargebacks. Understanding how a chargeback affects your business profile will ultimately help you resolve issues that you may experience in general day-to-day relations with your customers.
A chargeback is an action that is taken by your payment processing company in order to return funds to a customer or client that requested it through their issuing bank. Chargebacks are requested by the customer if they feel that a merchant will not refund their money as expected; following this, the customer would then communicate to their account provider that they are seeking to have the funds returned to their account.
You may feel that there is no difference when your merchant account provider issues a chargeback to a client instead of there being a resolution that resulted in a refund between the merchant and the customer. In fact, the implications of chargebacks on your profile can be more severe than you may think. In a scenario when your merchant account provider finalizes a chargeback, this would result in additional fees charged for the chargeback and ultimately contributes towards your chargeback ratio; a high chargeback rate can get your merchant account canceled. Often the thresholds for a chargeback ratio are around 1%, exceeding this threshold may result in:
So ultimately, as a business, you would not want the instance of chargebacks appearing on your profile, especially if you are already within challenging verticals predefined by a high-risk merchant account provider. Clear communication with customers regarding company policies and customer service will make it easier for your business to issue refunds to avoid chargebacks.
The most common types of chargebacks to look out for are:
Merchant error involves an innocent oversight like mistakenly charging the incorrect amount or billing for the same purchase twice. 20-40% of all chargebacks are because of merchant errors.
Having a card hacked or stolen can lead to unauthorized transactions, otherwise known as payment fraud. You can take steps to reduce this kind of scenario for a chargeback by having chargeback alerts and fraud filters.
Sometimes customers do not realize the implications that a chargeback has for your merchant account, resulting in friendly fraud. Instead of trying to resolve a refund with the merchant directly, customers tend to go directly to their banks to initiate a chargeback against your account.
Now that you know why chargebacks are bad for business, it’s time to learn how you can avoid the occurrences of chargebacks and stay out of your merchant account provider’s “little black book” with these chargeback prevention tips.
Remember that a con artist is only as great as their last con and fraud is a constantly evolving medium for many people to make money; therefore, combating fraud and unethical chargebacks requires an ever-changing and dynamic response. It goes without saying that, as standard procedure, your high-risk merchant account providers may already have their own security protocols in place. That said, it wouldn’t hurt to have your own measures in place to avoid fraudulent chargebacks to your account and, more importantly, ensure that these measures are kept up to date.
Credit card security codes matter when shopping online because it ensures that customers looking to purchase from your online or e-commerce store actually have the physical card in hand. This makes it less likely for someone who does not possess the personal information of the cardholder to perform transactions without their knowledge, as the cards cannot be stored by either payment processors or merchants. In order to complete a successful transaction with a merchant, a one-time PIN or one-time password (OTP) would be issued to the customer in order to complete a transaction. Having a security measure like this in place would improve your merchant profile.
An address verification service would assist in reducing the risks by checking the billing address information listed on the transaction against the information that is listed with the AVS. If the information analyzed does not return a match, you could be looking at a scenario that would be viewed as fraud. The experts at First Card Payments recommend requesting both shipping and billing details when customers are making purchases online in order to reduce the potential risk of issues that may arise from fraudulent transactions.
Ensuring that you are listening to your customers and going above is the best way to achieve customer satisfaction. When it comes to reducing chargebacks, increasing your level of customer service can be a great asset.
Keeping various avenues of communication open to customers makes customers feel valued at any point during their journey when they purchase products or services from you. It may even help them understand the difference between a chargeback and a refund. Make sure that your contact information is easy for your customers to find and that you are monitoring the different platforms through which your customers are able to reach you.
Keeping your customers happy is one of the tools you can rely on to help issue refunds to avoid chargebacks. A happy customer is less likely to submit a chargeback request with their account provider.
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