How Retailers Can Prevent & Fight Debit Card Chargebacks
Nearly every e-commerce merchant understands the risks of credit card chargebacks. They’re expensive, time-and effort-consuming, and potentially devastating to an online business. Many merchants may think that accepting debit cards doesn’t open them up to the same risks — after all, the funds in a debit card transaction are withdrawn from the customer’s account immediately after purchase.
Plus, if the customer waits more than 60 days to contact the bank about an unauthorized purchase, that customer is often left responsible for 100% of the charges.
Although it’s true that merchants are less likely to incur any financial risk with a debit card transaction, they’re not immune to the damage debit card chargebacks can cause. Here are some smart ways merchants can mitigate that risk.
Smart Strategies for Preventing Debit Card Chargebacks
Implementing one or more of these chargeback prevention strategies can help merchants limit their exposure and keep more of their hard-earned revenue.
Some customers file chargebacks when they don’t recognize a company’s name on their bank statement. Keep things clear and make it easier for debit card holders to recognize their purchases by using the company’s web address as the descriptor rather than the company’s official name or DBA. If the company descriptor varies, ensure customers know what name to expect on their credit card bills.
Update Product Descriptions and Photos
Customers want to be sure they’re getting exactly what they want when they place an order online. Ensure that online descriptions are comprehensive and include details like dimensions, material, color, and any defects or damage. Accompany these descriptions with several high-quality photos of the products, taken from different angles, so customers can’t file chargebacks claiming the item received doesn’t match the item advertised online.
Be Flexible About Returns and Exchanges
If customers are dissatisfied with a purchase and don’t feel they can come to a resolution with a merchant, they may seek out forced refunds in the form of chargebacks. But flexible return, refund and exchange policies encourage clients to work out their concerns directly with the merchant, saving on costly chargeback fees and penalties.
Refunds also give customers a faster return of funds to their account and a better chance of recouping more of the purchase price. As a result, customers may be more willing to work with a merchant to arrange refunds – if the customer is aware of the merchant’s easy return process.
Offer Exceptional Customer Service
Sometimes, frustrated customers just want to be heard. And if the merchant is known for providing exceptional service and treating customers fairly, customers are often more inclined to contact the merchant directly to resolve an issue rather than heading straight to the issuing bank to file a chargeback.
Merchants can improve their reputation for exceptional customer service by offering consumers multiple ways to get in touch with customer service departments, promptly responding to all inquiries, and empowering their staff to address and resolve customer concerns.
Consider Authorization Holds
During an authorization hold, a merchant authorizes the customer’s card at the beginning of the service for a specified dollar amount, temporarily locking the funds for a transaction and preventing the cardholder from accessing the funds and spending them elsewhere. For customers paying via debit card, the funds for an authorization hold are deducted immediately from their bank account’s available funds.
The merchant doesn’t actually receive any funds from the transaction — and the transaction isn’t considered complete — until the merchant submits the final charge to the processor. And until that transaction is completed, customers don’t have a purchase they can dispute and escalate to a chargeback.
Tips for Successfully Fighting Chargebacks
Unfortunately, even the best customer service and the smartest planning can’t prevent customers from occasionally filing a chargeback after making a purchase. But merchants can increase their chances of successfully defending a chargeback dispute. Here’s how.
Keep Documentation Accessible
From purchase receipts to shipping confirmations to customer correspondence, every e-commerce transaction generates substantial amounts of paperwork. And while merchants might not feel they have the time or resources to keep it all organized and accessible, it’s critical that merchants have a system like this in place. Without one, merchants will find it challenging to find and submit the compelling documentation that helps them win chargeback disputes.
Understand Reason Codes
Knowing exactly why a customer filed a chargeback helps merchants identify what compelling evidence they must submit to increase their chances of a successful representment. These reason codes do occasionally change, so merchants need to ensure they’re staying up to date.
Invest in Fraud Prevention
Every dollar counts when you’re a growing business.
And unfortunately, a single dollar of fraud can end up costing merchants more than $2.90 for time, fees and penalties, physical goods, and shipping costs. And that doesn’t even start to cover other hidden costs, like the cost to a merchant’s good reputation.
Partnering with a trusted fraud prevention solution like ClearSale can help merchants stop fraud before it damages their bottom line.
In fact, ClearSale’s 100% chargeback guarantee assures merchants that if ClearSale ever approves a transaction that turns out to be fraudulent and results in a chargeback, ClearSale will pay the entire amount of the chargeback.
Sound appealing? Contact our fraud analysts today to learn more about why more than 6,000 companies worldwide trust the ClearSale solution!