The first indicator that a business is ready for the big league is setting up its payment options to accommodate different customers' preferences. In America, the most preferred mode of payment is a card for both brick and mortar and online purchases. 

That means you may not do well if you do not have this option. However, card payment options come with hidden threats that most startups do not realize until they experience their effect – often in the form of chargebacks. 

What Is Chargeback 

Chargebacks occur when a customer disputes a payment from their account. The provision for consumers getting back their money from an establishment was a creation of the Fair Billing Act of 1974 to protect card users from fraud. When a bank receives a complaint from a customer, the bank reverses the transaction and returns the money into a customer account.

The bank will also send a chargeback code to the merchant. The code is meant to identify the reason for their reversal which is important because it helps you as a business person to identify triggers and find ways of avoiding future reversals. 

Causes of Chargebacks

Chargebacks are a mediation avenue for customer merchant disputes. Some of the main causes of consumer complaints and consequently a chargeback include:

  • Delivered items not as advertised
  • Item purchased arrived damaged or was never delivered
  • Continued subscription fees even after cancellation
  • Fraudulent purchase
  • Double charging
  • Charges differ with amounts on receipts

Customers and merchants can iron out these situations through communication. If the merchant is uncooperative, the customers can charge back the purchase. Unfortunately, some customers abuse the privilege and engage in reckless buying because they can dispute their charges. 

How to Protect Your Business

While you may not eliminate chargebacks altogether, you can do a few things to minimize the chances of chargebacks, such as:

Have a Clearly Outlined Return Policy

It is important to have a clear return policy on your website and make it known to the customer before making a purchase. You could provide an option for signing or confirming they agree with the set terms.

Enhance the Security of Credit Card Transaction

If you haven't updated your terminals to allow for EMV cards, it is a good idea to do it. EMV cards help prevent fraudulent transactions and, consequently, the frequency of chargebacks. 

Also, set up your system to require customers to enter their CVV numbers and zip codes when checking out. With this kind of information, challenging a chargeback can be much easier.

Have a Dispute Resolution Protocol

Most customer complaints are genuine. For example, if their delivery reaches them while damaged, they should have an easy way of returning it and replacing it, or they get refunded. 

Refunding is much cheaper than having a chargeback because you will need to pay some fees for the chargeback.

Be On the Lookout for Fraud

Some customers will buy to defraud; therefore, you may need to look out for fraud. So you will want to do your research before accepting a high-value transaction.

Also, trust your guts. If you feel uneasy about a specific transaction, hold it off until you can be sure it is okay to go ahead.

Fighting a Chargeback

The consumer is not always right. So you have a right to fight back. There is usually a ten-day window between the transaction reversal and when you lose your right to challenge a reversed transaction. 

If you have sufficient evidence to disprove the customer's claims, you can engage in a chargeback representation. It is, therefore, important to keep transaction documentation safe just in case you need to dispute a chargeback.