How Businesses Can Minimize Credit Card Chargebacks
According to a new report from Midigator, two out of every three chargebacks on credit card accounts could be avoided with simple adjustments on the part of the merchant. This could save businesses substantial money in the long run, and could improve customer experience.
A chargeback is a reversed credit card transaction, similar to a refund. However, instead of the business processing the refund to the consumer, the bank forcibly removes funds from the business’s account. This most often occurs when a consumer believes a transaction is fraudulent, or when a consumer cannot reach the business for a refund. Typically, it takes longer for a chargeback to be processed than a refund.
Chargebacks are costly for businesses. Most chargebacks come with a $20-$100 fee, even if the customer decides to cancel the request later on. Additionally, many customers complete a chargeback without returning a product. In those cases, the business is out the cost of the product and the fee for the chargeback.
Midigator found that 66% of consumers always attempt to reach a business before requesting a chargeback. Another 12% do this some of the time. If the business is unwilling or unable to process a refund, consumers contact the bank to get their money back.
Among consumers who contacted their banks directly instead of the merchant, 48% said they could did not recognize the name of the business making the charge. Otherwise, they would have reached out to the business instead. Another 18% said they could not find contact information for the business.
How can chargebacks be avoided? Through straightforward refund policies, easy-access customer support, and quick shipping times. When asked what happened after they contacted a business for refund, consumers said they were unwilling to refund or exchange the merchandise (24%); the business did not respond to communication attempts (22%); and the merchandise was allegedly ‘on the way’ (17%). Resolving these matters could significantly decrease the amount of chargebacks processed.