Chargeback Survival Guide: How to Prevent & Manage Them

chargeback survival guide

Chargeback Survival Guide: How to Prevent & Manage Them

Chargebacks are more than just temporary inconveniences for your business. If you don’t have the appropriate tools in place, chargebacks could cost you a significant percentage of your revenue.

Your business faces chargebacks when consumers dispute their purchases with their bank or credit card provider. This can lead to your business losing the amount of the transaction and incurring additional fees.

Working through chargebacks requires all three parties involved – you, your customer, and your payment processor – to communicate and determine what precisely went wrong with the order in question and who is entitled to the funds.

When faced with a chargeback, you’ll have the opportunity to assess the reason code provided by the bank detailing why it is that the consumer – and, subsequently, the bank – have requested both the return of funds and a chargeback fee.

If you don’t actively try to prevent chargeback fees, they can really add up, and you may lose a significant percentage of your revenue over the course of a fiscal year. On top of that, dealing with chargebacks can be time-consuming, and receiving one too many can put your business at risk of losing your service provider. Fortunately, there are ways to avoid chargeback fees and to keep a relationship with both your consumers and their banks civil and financially-viable.

Chargeback Reason Codes

Reason codes as issued by banks come in a wide variety of forms. There are, in fact, 151 reason codes that a bank can issue to your business if you receive a chargeback. A credit card can also send you a few different reason codes, complicating the messages your business might receive if a client disputes a charge.

There is some good news, though. Reason codes break down into five primary categories. The categories that you may encounter include:


The majority of chargebacks that come your way may fall under the fraud or “no authorization” category. These codes are in place to defend consumers from identity theft and similar misuse, and they address a wide variety of scenarios, including:

    • Magnetic stripe fraud
    • Keypad fraud
    • Fraud involving multiple charges for a single transaction
    • Identity theft
    • Unrecognized transactions
    • Instances involving the violation of card or banking network rules by the merchant in question

You may also receive one of these codes if the consumer’s bank opted to decline authorization of a transaction at the time of purchase, either due to the bank’s perception of fraud or an error involving one of the consumer’s bank accounts.

Cancellation of a Recurring Bill

Consumers also have the right to cancel recurring billings through your business should they no longer wish to benefit from the goods or services you provide. You might receive a reason code that falls within this category if a consumer claims that:

    • They continue to be billed for goods or services that they no longer benefit from.
    • A merchant allowed a subscription or similar relationship between a client and themselves to run even after said merchant was informed of the client’s cancellation.
    • The credit or debit card that the client used to arrange a recurring transaction expired.
    • The consumer did not understand the terms of a recurring transaction.

Products & Services

You may receive a products and services code if a consumer claims to have taken issue with a product or service received from your business, regardless of whether that purchase was made online or in-person. Reason codes in this category can address instances including:

    • When the product in question was deemed ineffective, defective, or to have differed from its original description
    • When the product was damaged during the shipping process
    • When the product was lost during the shipping process
    • When the consumer did not receive the goods or services they paid for
    • When the consumer returned the product they purchased but did not receive a refund for those goods
    • When a banking error or another mechanical mishap marked a credit charge as a debit charge or vice-versa

Hotels merit their own reason code within this category. Consumers wishing to challenge a “no-show” charge from a hotel may dispute the claim with their bank, at which point the hotel may receive a reason code and chargeback from both the consumer’s credit card provider and the bank in question.

Liability Shift

This affects in-person transactions. Liability shift reason codes came into effect in 2015 when the United States shifted towards the use of credit and debit cards with chips. These codes continue to apply to businesses that fail to provide their consumers with the means to make a purchase via a chipped credit or debit card.

The only time that you might see one of these chargeback codes come your way is if your brick-and-mortar shop is not equipped with a functional chip reader. If you don’t have one of these readers on the premises, then a consumer who wishes to question a purchase made in your business may note to both their bank and credit card provider that they possess a chipped credit card, attempted to use it, and had to resort to using a magnetic strip when not provided with the appropriate facilities to protect their private data.

Other Means

Consumers may also choose to dispute a charge through your business for reasons that fall outside of traditional reason codes. Certain catch-all reason codes meant to address these situations can include:

    • A consumer wants to dispute the amount they were charged on an international transaction.
    • A consumer provided either the bank or credit card company with an alternative proof of payment, suggesting that they used another means to secure their purchase.
    • A consumer’s dispute cannot be classified by an existing reason code.

Note that a consumer’s bank does not have to note the reason that a consumer has chosen to dispute a particular claim. To avoid doing so, however, the bank will have to inform your business that it’s not specifying the charge – an action that has its own code as well as individualized reason codes through active credit card companies.

Did you know?

You can figure out your business’s chargeback rate through a simple math equation. It’s called the chargeback-to-transaction ratio, and you divide your total chargebacks by the total number of transactions over a month.

Chargebacks & Complicating Factors

You may find yourself facing chargebacks for a myriad of reasons, all of which can be addressed by the aforementioned reason codes. While the amount of time a consumer has to challenge a purchase recorded in their bank account will vary based on the bank in question, most banks will issue a chargeback within 120 days of the initial purchase of a good or service. The consumer in question will not have to go through your business to issue a chargeback but rather only has to issue a complaint with their bank to get the process started.

These processes can grow more complex if the consumer in question made their payment to your business through a third-party like PayPal. These third-party sites will still let you communicate with the consumer’s bank, sending over a reason code along with information about the chargeback. However, third-party platforms can also drag out the chargeback process, leaving your business in a financial bind for up to three months.

The Chargeback Process

The process through which a chargeback travels from the consumer to your business involves a lot of intercommunication between that consumer’s bank, their credit or debit card provider, and you. From start to finish, this process often involves the following steps:

  1. A consumer must bring forward concerns about a purchase to their bank.
  2. The bank will extend a credit to that consumer, refunding the cost of the purchase that’s been contested.
  3. The bank will request additional information about the purchase from the card provider.
  4. The bank, card provider, or both will issue a reason code to the merchant in question.
  5. Merchants, at this point, have the option to pay the chargeback or to contest it.

To contest a chargeback, your business must send both the charge and evidence that the charge was made in good faith – information usually detailed in a rebuttal letter summary – to the bank in question. The bank will then consider the newly-submitted evidence and come to a decision regarding whether or not the consumer in question should retain their refund credit.

Note that all parties involved in this process, upon finding themselves dissatisfied with the proceedings, may request that the charge be reviewed. If no party can come to an agreement regarding the state of a purchase, that purchase enters an arbitration phase, during which the credit or debit card provider involved in the process will assess the case and determine how best to address it.

Chargeback Best Practices

Under ideal circumstances, you’ll want to keep your chargeback rate below one percent to keep your customers happy and your business in good standing If you’ve had trouble with chargebacks in the past or are looking to avoid them, you can:

Make Your Return & Refund Policies Crystal Clear

One of the easiest ways to prevent chargebacks is to make sure your consumers know what your return and refund policies look like. If you can, make these policies highly visible both on your website and in your brick-and-mortar shop, if applicable. Consumers who understand what kind of agreement they’re stepping into upon purchasing a product or service from you may be more willing to reach out and work with you directly if they’re not satisfied with their product than they will be tempted to run to their banks.

Request Customer Security Information

When you request that consumers make accounts on your platform at the time of purchase, you’re killing two birds with one stone. For starters, you’re encouraging that consumer to return to your platform in the future. More importantly, though, you’re limiting the risk of consumer fraud and, in turn, chargebacks. When consumers have to go through security questions at their time of purchase, you’re protecting their data while also ensuring that they understand the purchase that they’re making. In short, you’ll have more material on hand if a chargeback does come your way to defend the purchase that was made.

Cultivate Your Customer Support Network

You can’t prevent a consumer from requesting a refund on a product or otherwise questioning their purchase. You can, however, provide your consumers with a myriad of different ways to contact your business’s representatives.

Make sure that your consumers have ready access to a live chat, call-based customer support, or even an on-site FAQ that they can reference if they have questions about their purchases. By ensuring that consumers can get in contact with someone associated with your business, you facilitate a better business-to-client relationship and, in turn, limit the number of chargebacks you might face if customers find themselves dissatisfied with a product or service.

Ship Your Products On Time

When you own and operate a small business, it’s easy to let time get away from you. If you make a point, though, of consistently shipping your products safely and within a stated margin, you’ll cultivate a better relationship with your customers. Furthermore, customers will come to trust your business, knowing that if mistakes were made involving the product or service they requested, you may not be the source.

Invest in Fraud Screening & Additional Security Measures

One of the best ways to prevent chargebacks is to make sure that you have the appropriate security measures in place online and in a brick-and-mortar shop. If you choose to encrypt consumer transactions, delay customer billing, and take other essential steps to protect customer data, you’ll encounter fewer instances of consumer fraud. In turn, you won’t see as many chargebacks citing fraud as the reason you now have to front a services fee.

Chargeback Tools

There are a wide variety of software tools designed to help your business avoid chargebacks. These tools can provide your business with additional anti-fraud measures, point-of-sale security, and chargeback assessments meant to help you recover what revenue you can, should you face an applicable fee. But choosing the right tools for your business can seem overwhelming.

There’s no reason for your business to face egregious chargeback fees. If you’re looking for a way to better protect both your revenue and your consumers’ interests, Direct Payment Group has the solutions you need.

Direct Payment Group offers you access to a plethora of in-platform chargeback protection tools meant to help you address reason codes and limit the fees your business might otherwise face, all without alienating your consumers. Click on the button below to schedule a consultation with a chargeback expert.

Chargeback Management: 6 Ways to Keep Customers Happy

manage chargebacks and disputes

Chargeback Management: 6 Ways to Keep Customers Happy

Happy customers make for a successful business. However, the quest to make your customers happy can sometimes lead to spending much of your customer service time smoothing over disputes and issuing refunds. Too many disputes will inevitably affect your reputation no matter how well you handle them. And when your team is stuck dealing with conflicts, they cannot work on growth or revenue stimulating activities, such as upselling.

A much better approach is to take every step you can to keep disputes and refunds to a minimum without initiating policies that turn off customers. It would help if you also had the right tools to easily and quickly deal with legitimate and unavoidable disputes.

Have a Clear & Reasonable Return Policy

Make sure that your return policy is clear, easily accessible, and reasonable. A return FAQ page can be beneficial here. If your return policy is too rigid, then you may get an increase in chargebacks (and chargeback fees).

You can also consider automating your return process as much as possible, so customer service agents are not involved in returns unless there is an issue. If you have a blanket 30-day return, you can set up a system that will generate an RMA and instructions on shipping the return. 

As much as you may not want to, it’s wise to offer free shipping on replacement merchandise and be willing to eat the cost of merchandise damaged in transit, even if it’s not your fault. Customers will often go elsewhere if forced to pay for a replacement while the vendor insists it’s not their responsibility. Making customers pay for shipping will only exacerbate the problem.

Did you know?

In its report, Pulse of the Online Shopper, UPS found that 73% of the consumers they surveyed said the return experience affected whether they would continue shopping with a retailer.

Make Sure You Properly Describe Your Product

Inaccurately described products often prompt returns. Ensure your product descriptions and specs are honest and accurate so that your customer knows what they should be getting. List the accessories that ship with the product, so they know whether they will be getting things like batteries. Conversely, if your product does not include accessories, post that information as well. Images should always be part of your product description. That means use images of the actual product, not stock images.

In the case of apparel, this also goes for sizing. Have an accurate size chart that gives the actual clothes measurements, rather than a vague “small, medium, large.” These descriptors help prevent customers from ordering the wrong size and having to return it, or ordering multiple items and returning those that don’t fit. Many customers don’t think about the impact this has on retailers, especially smaller ones. If they can trust your sizing, they are a lot less likely to do that. Train customer service representatives to answer questions about sizing, accessories, system requirements, and other issues that could cause a return.

Ninety-five percent of returned merchandise has absolutely nothing wrong with it; it just turns out not to fit the customer’s needs when they get it out of the box. Make sure they know what they’re getting before they click the purchase button.

Encourage Customer Reviews

Customer reviews are helpful for your sales and reputation, but they can also reduce the return rate. Reviews often contain information that is useful to the purchaser, and most people read them.

The more reviews, the better. Reviews don’t just tell your customers about the quality of an item; they tell them what problems it has solved for others. Reviews guide the customer to the right purchase decision right away and tend to limit returns.

Provide Online Live Chat

These days, so many sites have an online chat that customers have come to expect it. You can use an inexpensive chatbot for simple inquiries. Chatbots can often handle queries such as, “Does it come in black?” You can always escalate the chat to a human representative when the bot can’t answer a question.

People will call for answers if there is no other way to contact you, but you risk dealing with a more irritated customer when you get them on the line. Email helps prevent a confrontation with a customer, but there is a general perception that email responses are slow. Online live chat allows customers to ask their questions without leaving your website, get the answers they need right away and make the right decision whether to purchase. Your customer service team can also handle multiple chats in a manner they can’t with phone calls.

It might seem counterintuitive, but sometimes you need to talk a prospective customer out of a purchase when it is obvious they will only return the product or request a chargeback.

Optimize Packing & Shipping

Many returns happen because of product damage during shipment. If your carrier is damaging too many items, it might be time to look elsewhere. Make sure to use tools (inventory management software) to minimize incorrect shipping, especially at busy times.

It might be worth hiring a couple of extra people in the busy time between Thanksgiving and Christmas. Also, make sure you package your products correctly. Spending extra on packing to reduce damage can have a great ROI.

Deal Properly with Complaints

Even with all of this, you are still going to get complaints. A shipment may be lost, damaged, or delayed. Somebody could order the wrong size for somebody else. Somebody ends up buying software thinking it will run on their computer, only to find that they misread the system requirements. Be sure to train your customer service team to handle complaints properly.

A few tips for dealing with complaints include:

  • Don’t challenge your customers’ complaints (even if it’s not your fault)
  • Don’t get emotional (even if they are)
  • Allow your representatives to be flexible in their responses (sometimes you have to bend the rules to get the right response)
  • Follow up to make sure that the problem is solved – especially if you were able to present a solution that avoided a return
  • Respond quickly
  • Avoid excuses and always apologize
  • Log all complaints so you can track trends

In some cases, you may get a customer who is just going to keep complaining no matter what. At some point, you have to decide whether their patronage is worth the hassle.

If you need improved tools to handle disputes, chargebacks, and returns, Direct Payment Group has you covered. Click the button below to find out how our chargeback management system can help you log, manage, and reduce chargebacks and returns.

How To Address Chargebacks Before They Happen

prevent chargebacks

How to Address Chargebacks Before They Happen

Chargebacks happen. Whether you sell your goods or services online or in person, you’re going to deal with them from time to time. How often you deal with them, however, is something you have some control over.

Planning is key. Before you receive your first credit card order, you can have measures in place to protect yourself from illegitimate chargebacks and the processing fees that take an even bigger bite out of your profits. Also, it’s never too late to start limiting chargebacks. Even if you’ve been a victim of chargeback scams in the past, these best practices will help expose them for what they are and mitigate the damage to your profits.

First, we’ll need to explore the types of chargebacks you’re up against and why they’re so much more damaging to your bottom line than just issuing a refund. Then we’ll look at some best practices you can use to spot scam chargebacks and protect your revenue, your reputation, and your relationship with your credit card processing company.

Why Chargebacks Cost More Than You Think

Honoring a chargeback request is not simply a matter of losing a sale and restocking an item. Your credit card processing company also incurs a fee, which they will pass along to you. Depending on your processing company, that fee could range between $20 and $100 for each chargeback.

If you have too many chargebacks, measured as a percentage of your total transactions, you not only have to cope with high transaction costs, but you risk your account getting shut down. These additional fees adversely impact your profitability over and above the negative impact of refunding a customer.

Therefore, it makes sense to take as many precautions as possible to limit the number of chargebacks you need to honor. Though you won’t eliminate all chargebacks, these best practices are a great defense against the careless or fraudulent types of chargebacks that could damage your business.

It’s Better to Prevent Chargebacks Than Fight Them

When you take proactive steps to address chargebacks before they happen, you avoid the risk of paying high fees or, even worse, getting your merchant account shut down. The following actions will contribute to drastically decreasing the number of chargebacks you have to fight or issue.

Make Sure Your Payment Descriptor is Accurate

Customers who do not recognize a charge on their credit card statement sometimes initiate a chargeback. They do not recall purchasing something because their credit card statement differs from the name on your website or storefront. Avoid these chargebacks by ensuring your payment descriptor matches your storefront name, whether in person or online. Contact your payment processor to have this information updated.

Set Transparent Return & Exchange Policies

Sometimes customers initiate a chargeback because they are unsure of a company’s return and exchange policies. Set expectations with your policies by including clear language in the terms and conditions of your sale. More importantly, display your policies in your store or on your website and include them on your receipt. Keep them visible, so your customers are more likely to contact you for a refund than contact their credit card company.

Provide In-Depth Product Descriptions

Online retailers must create in-depth product descriptions that accurately reflect the product their customer receives. Include information such as material, weight, and dimensions. If you sell clothing products, offer sizing information with measurements that give your customer the best chance of getting the size right on their first order. When your customer knows exactly what they’re ordering, they are less likely to initiate a chargeback.

Include Professional Photos or Videos

Though a complete description is essential, photos are just as important when you are an online retailer. This allows your customers to see the product before they have it in their hands, reducing the chance they will call their credit card company to initiate a chargeback. It’s difficult for someone to argue they did not know what they were ordering when you have clear pictures and/or videos on your website. Depending on the product you’re selling, providing a 360-degree graphic or a video of your product is a great idea.

Follow Best Practices When Processing Credit Cards

Though actual fraud accounts for only a portion of chargebacks, it is real and you need to look out for it. You cannot stop every instance of unauthorized card use, but you can stop some of it when you follow best practices as you process credit cards. This includes verifying the cardholder’s identity and signature, confirming the billing address, and refusing to process cards with invalid expiration dates.

Provide Contact Information

If your customers cannot easily find out how to contact you with questions about deliveries, refunds, and other customer service issues, they may call their card company and initiate a chargeback. Include your contact information on your website, receipts, and any communication you have with your customers.

Communicate Delays in Delivery

Sometimes businesses have problems with delivery. Causes for delays can occur because of supply or error or a problem with the delivery service. You do not always have control over a delivery delay, but you can control how you respond to it with your customers. Keep your customers updated on any delays. If they wait too long before receiving any information on their order, they are more likely to initiate a chargeback.

Prioritize Customer Service

Excellent customer service creates loyal customers who want to interact and keep returning to buy more from you. Always go above and beyond to answer questions, satisfy customers, and make reasonable accommodations to ensure your customers are pleased with their order and your company. Loyal customers typically do not initiate chargebacks.

Keep Meticulous Records

Your business must have impeccable record-keeping capabilities. First, good record keeping allows you to provide exceptional customer service. You have answers to customer questions and concerns at your fingertips when they come into your store, email you, or call you. Second, good recordkeeping practices provide you with the information you need to fight chargebacks when they happen.

Provide Proof of Delivery

Providing proof of delivery to your customers is primarily for online retailers, but it is key to avoid chargebacks. You can use auto-reply software to deliver receipts and proof of delivery. Sometimes customers do not realize their products have arrived, or maybe the delivery person dropped the package at the wrong address.

Proof of delivery information allows you to find out what happened to the package. Additionally, those who attempt to initiate a chargeback with their credit card company sometimes commit fraud and say they have never received a package. Proof of delivery information makes it next to impossible for them to deny receipt.

These best practices not only protect you from many chargeback requests, but they also help build a solid relationship with both your customers and your credit card processor. As we move into a new year, it may be a good time to take an audit of your policies and see if any of these are missing.

Direct Payment Group can help you implement chargeback best practices. Click on the button below to start a conversation.

Chargebacks & Your Best Defense Against Them

defense against chargebacks

Chargebacks & Your Best Defense Against Them

For retailers, the holiday season can be a bittersweet experience. Merchants crave the smorgasbord of sales almost as much as they dread the chargebacks that come with this time of year, a kind of transactional indigestion. Thankfully, there are precautions a business can take to limit the discomfort of chargebacks; think of them as Tums for your business.

Chargebacks take a big bite out of your profits, but not all occur for the same reason. There are three types of which most retail businesses need to be wary of, which we’ve outlined below.

Types of Chargebacks

Friendly Fraud

Some chargebacks result from accidental fraud, which is often referred to as “friendly” fraud. Consider the following situation:

A person heads out for a day of shopping and stops at a Subway restaurant to grab some lunch. A few weeks later, she reviews her credit card statement and sees a charge for Pete’s Super Submarines. She does not recognize the charge, so she disputes it with her credit card company. She has no idea that Subway used to be Pete’s Super Submarines. The name change happened decades ago, but since some businesses need to report transactions under their legal or corporate names, you get a confusing line item like Pete’s Super Submarines.

Unauthorized Card Use

No mistake, this is actual fraud. Unauthorized card use happens when a thief goes on a shopping spree with a found or stolen credit card or a credit card number lifted through an identity theft scam.

Chargebacks occur when the actual card holder contacts their credit card company or the merchant and denies ever making the purchases. In many cases, card holders report unauthorized card use when, in fact, they made the purchases themselves and either don’t recognize the company on their statement or forget they ever made the purchase. This is why cases of actual credit card fraud account for a smaller percentage of chargebacks than user error or forgetfulness.

Merchant Error

Problems on the merchant’s end account for many chargeback requests. This is especially true during the holiday season when businesses are processing more orders than at any other time of year. Some common types of merchant error fraud are:

    • Delayed Shipments
    • Lost products
    • Wrong item shipped
    • Wrong quantity shipped
    • Wrong color
    • Wrong size

Though the chargeback threat can come from several different fronts, that doesn’t mean merchants are defenseless against it. Let’s look at some best practices and security measures stemming from PCI compliance you can take to help minimize chargebacks and protect your revenue.

Preventing Chargebacks

Whether friendly fraud, unauthorized card use, or merchant error, retailers can take proactive steps to prevent chargebacks before they happen. Providing a transparent buying experience for your customer is a great place to start. Furthermore, an open line of communication with the customer after the sale can reduce misunderstandings and help ward off friendly fraud or false claims of unauthorized card use. Let’s dig a little deeper into the details.

Clearly Defined Product Descriptions

Online retailers must ensure that product descriptions clearly describe a product and answer any customer questions. Providing professional photos, videos, or 3D renderings of your products also allows customers to see exactly what they are purchasing.

Listing product dimensions is critical. If a customer receives their order and finds out a product is much bigger or much smaller than anticipated, it opens the door for chargebacks.

Your customers need to know what you are charging them for and what they should expect. Your product description should also be transparent with any fees you charge, how long they need to wait for a product to arrive, any product warranties, and your policy for returns and refunds.

Open Communication

Put in the effort to openly communicate with your customers. If you make any changes to your business name, policies, or merchandise, make sure your customers know it.

The most important detail is to provide contact information so a customer can connect with you about an error instead of initiating a chargeback with their card company. Contact information should be prominently displayed on your website, your invoices, and any other collateral you send to your customers.

Sending follow-up emails about a customer’s purchase, shipping, and tracking also helps reduce chargebacks. It’s difficult for customers to claim they did not order something from you or do not remember ordering when you communicate with them.

Update Your Billing Descriptor

Your billing descriptor is your business name as it appears on your customers’ credit card statements. In the case of a name change, you should also update your merchant account so your billing descriptor matches your store’s name.

In most cases, credit card processors will list your company’s legal business name as your descriptor. This can be a problem if your DBA is filed under XYZ Company, but your client-facing brand is Bob’s Bike Shop (a real-life dilemma in the case of Subway and Pete’s Super Submarines). You can either contact your processor and ask them to change the descriptor to something that your customers will recognize or you can notify your customers that the charge on their statements will appear under your legal business name.

Post-Sale Customer Engagement

Customer engagement increases brand loyalty. You can use surveys and social media to learn more about your customer’s satisfaction level. Loyal, satisfied customers will not falsely claim an unauthorized charge and intentionally defraud you, reducing the number of chargebacks you have to issue down the road. Following up after purchase is also good customer service, which keeps loyal customers returning.

Despite your best preventative measures, chargebacks will get through, but this still doesn’t mean you have to roll over and accept them. As a merchant, you have at your disposal an arsenal of tools that can help you detect chargebacks and zap them before they gnaw into your profits. Many of these tools are easy to implement in your billing system, while others are already at your fingertips and just need minor tweaking.

Preventive Tools

You have a wide range of tools and services at your disposal to help you properly fight chargebacks before they happen. Sometimes, simply making changes to things you already have can help. You can adjust your network hardware and SaaS billing platform to create a last line of defense when the chargeback barbarians are at the gate. For instance, you can:

  • Use the fraud settings on your payment gateway to automatically detect suspicious activity
  • Block IP addresses
  • Reject expired credit or debit cards
  • Choose to block purchases from select countries
  • Use a catch-and-release style purchase review
  • Require a customer’s signature if they do not have a chip in their card

If you want to fortify your defenses against chargebacks, there are several services you can purchase. Some of the most popular and reliable are:

Verified by Visa

This is Visa’s program to make online transactions more secure. Verified by Visa confirms your customer’s identity, drastically reducing the chance for chargebacks. While this anti-fraud solution benefits you, it can also make it more difficult to appeal a chargeback when one does occur. However, the benefits of forcing a secure identity far outweigh the risk.

MasterCard SecureCode

MasterCard’s anti-fraud service, SecureCode, works similarly to Verified by Visa. Online consumers must go through a process that confirms their identity before they can complete a purchase. MasterCard requires cardholders to choose a SecureCode they must use for all online purchases. The concept of SecureCode is the same as customers using a PIN with their card when making an in-store purchase. MasterCard denies the transaction when the customer provides the wrong code, reducing fraud-related chargebacks.

Address Verification System (AVS)

Address Verification System (AVS) is a feature that compares your customer’s billing address with the address on file with their credit card company. All major credit card brands in the U.S. use AVS. You set up AVS through your payment gateway or virtual terminal. In either situation, you will receive a code that tells you whether addresses match, so you can avoid unauthorized card use that leads to chargebacks.

While it’s true that chargebacks can spoil an otherwise festive and profitable holiday season, there are many things you can prepare for them wisely. Having a reliable partner is key. Direct Payment Group knows all about managing chargebacks and can help you get control of them before they devour your profits. Click the button below to learn more!

The Art Of Managing Chargebacks

managing chargebacks

The Art of Managing Chargebacks

A few days ago, a question from Josh Kallmeyer in the Trends Facebook group prompted a long answer. People constantly have questions about chargebacks, and we’re always happy to answer them. Chargebacks can be a very significant hit for many businesses.

Chargebacks can have a huge effect on the payment processing capabilities of your business, and you’re standing with your payment processor. In short, no payment processor likes having to deal with them. So, the more you rack up the worse your standing with your payment processor becomes.

Managing chargebacks is, therefore, a major headache. This is Ibuprofen for that headache.

There Is No Escaping Chargebacks

The first thing you need to understand about chargebacks is that there is no winning them. As much as I’d love to say the problem is completely solvable, it just isn’t. Every business will deal with chargebacks at some point. You should put in work to prevent them – so they happen less – but you need to be ready for any that come up.

Another difficult pill to swallow is the fact that even winning a chargeback can have an impact on your business. You could win every chargeback that comes up. But if there a high percentage of chargebacks coming up, it’s still going to put your MSP in a position to limit (or close) your account. When there’s a high volume of chargebacks, either way, you can expect to see limits put on your sales volume.

So, you can never fully erase chargebacks or their effect on your business. What you can do is limit the volume of your chargebacks, and manage them effectively. Having and implementing a strategy for chargebacks is the key to remaining in good standing with your payment processor, even when incidents do come up.

The Tools You Should Use

The best defense is a good offense. You need to implement best practices in your customer journey and be communicative with customers after the sale. That way, if anything comes up, you can resolve the matter directly. This prevents a dispute needing to be filed and keeps you in good standing.

Then, you should be keeping an eye out for fraud. Right now, if you haven’t already, you need to implement a system for dealing with chargebacks that come in. If you can work through chargebacks before they get back to your payment processor, you’ll have already cut out most of the issues.

There are tools on the market that can help you deal with this. Having security measures in place, like 3D Secured, is a great first step. These require the user to verify their transaction, which can help catch fraudulent payments. Everyone should be using some system like this, but (as we mentioned to Josh) you’ll also want something more.

We recommend using services from companies like Signifyd, who go a step further with their fraud detection. Signifyd, as an example, reviews card data and IP addresses and compares them with location data to track fraud. Similar tools are offered by most major credit card companies, like Visa and MasterCard. These tools can catch and handle these chargebacks quickly, and do so mostly in the background.

Simply operating on best practices can prevent both fraudulent and non-fraudulent chargebacks. They are the best practices for a reason. Make sure to have extensive documentation to create legal protection, and to try to work with customers directly to solve issues. If you’re catching the problems before your payment processor, you’re doing well.

Similarly, you’re doing well as long as you’re fighting fraud. Penalties from chargebacks occur because they’re a problem for the other companies involved in your payment processing. If you’re willing to bear the load, they’re much less likely to care. Take chargebacks on as your responsibility, and you’ll be okay.

What To Do If You’re Really Worried About It

If you’re really losing sleep over your chargebacks, you can consider moving to a higher tolerance payment processor. They’ll be more accepting of chargebacks, although they’ll often have higher fees. And you’ll still need to stay on top of your chargebacks.

You should also be analyzing and responding to any fraudulent chargebacks you do get. Sometimes, you’ll see something a computer doesn’t. You might be able to detect fraud that a computer didn’t recognize, or you might notice a pattern developing. If your chargebacks are coming from a specific device, behavior, or product, you can make alterations that will cut down.

Chargebacks are a pain for everyone to deal with. And everyone does deal with them. If you’re having particular trouble with them, reach out at and we’ll go through your sales back and help you get more solid footing against chargebacks. We love solving issues for businesses, and this is a big one. Having your payment processing setup correctly is key to keeping business fun.