7 Ways Your High-Risk Business Can Prevent Chargebacks

July 17, 2023

By Rafael Lourenco, EVP, ClearSale

Notify CustomersThe ability to accept credit cards is a critical component to the success of any business, but it adds an element of risk, too. If merchants find themselves on the receiving end of time-consuming and costly chargebacks too often, they can see their chargeback rates climb.

If a merchant’s chargeback rates rise too high, businesses may find themselves unable to keep a traditional merchant account. This will result in the need to work with a high-risk merchant service provider. They may even be at risk of losing the ability to process credit cards altogether.

So, while all merchants should be concerned about minimizing their chargeback rates, high-risk merchants need to be especially vigilant. Here are seven ways high-risk merchants can prevent chargebacks and protect their business.

1. Ensure Customers Know Exactly What They’re Buying

One of the most common causes of chargebacks is customers receiving a product or service that differs substantially from what was described on a merchant’s website.

High-risk merchants can minimize these claims by including them on their product pages:

  •       Complete and comprehensive product descriptions that feature dimensions, colors, materials, quantities, and any defects and damage
  •       Pictures from multiple angles
  •       Videos of the product in use

Answering customer questions promptly and completely can also guarantee customers are getting just what they want and expect.

2. Notify Customers About Recurring Billing Charges

female merchant in warehouse taking inventoryOne of the easiest ways to avoid chargebacks on subscription-based services is to not require a customer to enter their credit card details for the free trial in the first place.

But merchants who fear losing out on a sales opportunity and want to require credit card information may find themselves at increased risk for chargebacks. After all, it’s easy for customers to forget that they’ve signed up for a product or service to be provided to them on a regular basis.

That’s why merchants who offer subscription-based products and services need to ensure they’re reminding customers every time a recurring bill comes up well before the subscription renews about upcoming charges and important order details. This gives customers time to plan for the expense and prevents any surprises when they get their credit card statements — and it also protects merchants if the customer files a chargeback saying they didn’t know about a charge.

For merchants that offer subscription-based services, they can also prevent chargebacks by clearly stating cancellation and billing policies on websites and in all customer communications. And if a customer does cancel, e-commerce retailers should process that cancellation in a timely manner.

3. Provide Realistic, Accurate Delivery Estimates

After a customer has placed an order, they want to know exactly how and when that order will be delivered. And if that order takes too long to ship or isn’t delivered in the time frame promised, merchants run the risk of the customer filing a chargeback. 

Merchants should clearly communicate when an order is expected to ship and what method will be used for delivery, and they should also provide a tracking number that lets customers follow their purchase as it moves from the merchant to the customer.

4. Give Extra Care to Custom Orders

Treat Customers WellCustomers already have high expectations when they purchase, for example, an expensive piece of jewelry from a merchant’s website. But when they add a personal touch to the piece or they have a piece custom-made, customers are even more invested in what the final piece looks like.

To avoid unhappy customers and reduce the risk of chargebacks, merchants should do their best to show exactly what the finished product will look like and then doing their best to make good on that promise. 

A common best practice for merchants offering custom orders is to add aproduct video to the product description page. This will improve expectations around what is being provided to the consumer.

5. Make Billing Descriptors Recognizable

A billing descriptor is a short description on a credit card statement that describes the merchant from whom the customer made a purchase. Sometimes, customers will initiate a chargeback when they don’t recognize that billing descriptor as familiar.

To avoid these kinds of chargebacks, make sure the descriptor used is the same name that appears on the website customers are purchasing from (note that this may be different than the company’s legal name or their DBA) or that provides accurate, brief information about the product or service purchased. Some merchants choose to use their URL as their descriptor, while some processors even allow for dynamic descriptors that let merchants add purchase details after their business name.

6. Provide Exceptional Customer Service

Poor customer service is another common chargeback trigger, so business owners should always respond promptly to client calls and emails and other customer service inquiries. When businesses are able to quickly address client concerns, questions or dissatisfaction, they can reduce the likelihood an unhappy customer will file a chargeback.

7. Implement a Robust Fraud Prevention Solution

Fraud Prevention

To prevent chargebacks from happening in the first place, business owners should consider implementing a robust fraud protection solution that can detect the subtle nuances of fraud and stop fraudulent transactions from ever processing. Today’s advanced solutions, combining artificial intelligence and highly trained analysts, can make a big difference with reducing risk exposure.

While merchants can be proactive in preventing chargebacks, they can’t stop them all. New data breaches, fraudsters’ new tactics, and even innocent mistakes can put merchants on the receiving end of chargebacks. But by implementing these smart strategies and working with a company like PayKings to find the right merchant account for their business, merchants can reduce their chargebacks, increase their revenue and build a thriving business.

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July 17, 2023 | Merchants | Guest Post