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What are you able to do to prevent and manage the occurrence of Chargebacks and Payment Disputes

Jan 20, 2023

If you operate an online business , when you make a sale, however the buyer receives a dispute notice. This usually happens weeks or even months following the purchase. You'll have administrative work to do and the possibility of losing money from the sale, and you'll find it harder to run the business.

Although this may not be often the case however, if it occurs frequently, significant suppliers like credit card companies could begin to penalize you or enforce stricter rules, or even have close ties with your company.

It's good to know having plans in place to stop disputes from happening and to manage the situation when it does happen. ensures your store is free from stress. Even better news? Learn all you require to know in this piece.

Table of Contents

What's an agreement? What is a chargeback?

Payment disputes occur when a person who uses the credit card firm they have used to dispute a charge which was made through their account. The credit card company will take the issue seriously and if they determine that the reason for the dispute is valid and they'll issue an initial credit on the account of the customer while the dispute is resolved. This is also known as an chargeback.

What are the reasons why disputes and chargebacks happen?

There are two main reasons that can lead to disputes regarding payment:

  1. Dissatisfied customers
  2. Fraudulent card activity

We'll get into greater detail regarding both of these topics a bit later.

From the first look, one may believe that they have greater control over this than the second. The reality is that there is some degree of control on both, like you'll soon discover.

The reason why merchants must deal with differences

Payday disputes aren't something that one can simply leave them unattended and hope that they'll go away. They won't. In fact, ignoring them could create problems that grow and may affect the viability of your business.

Card companies monitor the amount of dispute (the ratio of confirmed transactions in comparison to those that are not) and could charge more fees or penalize you if you have a dispute.

What to do when you receive a chargeback

What you must do when you receive an email from a company that states:

React immediately

If your credit card company starts by asking questions, it is crucial to get back to them promptly. If you use Payments as a payment method and you're part of the Payments network, you'll be informed about any possible disputes via post and an email notification within the account dashboard.

If you fail to respond within the shortest amount of time leads them to think that you're not likely to challenge the claim. Each card network has their particular timeframes that determine how long an inquiry into an issue remains open. It is important to gather the right evidence when submitting said evidence before the timeframe expires.

If you're using PayPal, it is easy to sign onto your dashboard for your store to address the issue.

dispute response in Payments

Provide documentation

In addition, you need to be able to provide clear and convincing proof about the particular transaction. The evidence should include the type of card, the amount of your credit card (or the version that is shortened), the date, amount and date of the transaction, aswell as the order information or evidence of delivery the transaction was made.

Information they collect can help in determining the likelihood of fraud and ensure that everyone is on the same page regarding the situation.

Submit requested evidence

Apart from the normal documents, the system may require additional information about the transaction. If they do not, you should send your document regardless. Your time spent gathering the necessary documents will be beneficial, however make sure that you've submitted all the required documentation by the deadline.

The kind of document you submit will vary based on the type of issue that you're dealing with. There are at the very least seven types of payment disputes:

  1. The refund didn't get processed.
  2. Multiple charges
  3. Fraudulent charges
  4. Inaccurate charges
  5. No product received
  6. Product unacceptable
  7. Subscription canceled

What happens when your company isn't able to take appropriate action to set up a charge?

The concept of chargebacks can be intimidating and complicated to handle. Yet, they are an essential aspect to running a company with just a few steps of procedures that can save the business from anxiety. Credit card companies still want to see you succeed and ensure their customers' safety, therefore it is essential to follow these steps to maintain your good name.

If you decide to totally avoid chargebacks, things can become complicated. This is the method to avoid or not check chargebacks:

At first, you'll lose income and profit from the sale and will be charged for a fee plus the loss.

If your dispute numbers start increasing and you are unable to address them, your business may charge you fines or higher fees until you reduce the chargeback percentage down to a lesser percentage. If your issue persists then you may be barred to accessing certain portions of your revenue from sales. In the end, they may cease accepting payments and mark your account as high risk.

This could keep the other card companies from working with the other card companies. And if you can't accept payments online, it's difficult to run your company effectively.

The truth is that this is not a typical case. It's completely avoidable if do the proper steps.

What is a threshold for dispute?

The threshold of dispute, or the threshold for charging back is the technique that card networks use to decide if they need to increase their monitoring of merchants or businesses so that they can reduce their rate of disputes.

What is the rate of dispute?

"Dispute rate" or "dispute rate" measures the amount of disputes that are disputed per total processed transactions in an arbitrary timeframe, such as one week. In the example above, if 500 transactions were processed in the course of the week, but only five were in dispute while five weren't, you'd have an average of 1% for the rate of disputation for each week.

It differs from "dispute activity' that measures the percent of disputes in the time frame regardless of the date at which they were processed.

It is important to note that dispute resolution is not delayed for a couple of months or weeks following the purchase. This is what dispute activity encompasses. There could be five disputes in a single week, however when three of them were due to transactions that were completed prior to this week, the rate of disputes would comprise two disputes from the week prior, however the dispute activity will include all five. More information on the subject from Stripe regarding the calculation of the number of dispute.

chart of dispute activity

Credit card networks usually employ the amount of dispute in determining their limits on dispute resolution. Also, every card network is governed by its own set of thresholds. The threshold can be determined by the amount of disputes that are filed and also the amount of dispute, or more commonly the two.

Particularly, Visa will increase their penalty against businesses that have over 100 chargebacks per month or 0.9 percentage of disputing activity. However, Mastercard's threshold for disputes begins at 1.5 1.5 percent.

The amount of installments is advantageous for smaller companies, as if you only receive 50 installments in the course of a month, and just one gets challenged and you're at a 22% cost. The threshold for the volume of payments keeps small businesses from having to pay higher fines.

If you're using the payment platform and have questions about how to best handle disputes, you can always call the customer Support Team to get assistance.

What can I do to cut down the amount of disputes my shop is subject to?

Now that you understand how disputes work There are a few strategies to aid in reducing the number of disputes you have.

1. Use a clear bank statement descriptor

A specific description of the statement informs your customers about the location they purchased the product. It will immediately decrease the possibility of disputes that arise from unrecognized fees. The company will see your details and be aware that the purchase was legitimate and planned to make.

descriptor statement examples

If the customer sees this on their statement and wonders about the charge the client can contact your number directly, rather than making an appeal to the credit card provider You could be able to resolve the issue by talking to them.

2. Include company information on the receipts of transactions

Similar reasons are applicable to the descriptor for banks that provide customers with easy-to-read and accurate company information on their receipts increases chances of them contacting you in the event of problems, and not just their credit card business.

In the receipt, include your company's address, telephone number and physical address, as well as your logo, website as well as a note about the customer support. Make sure you do not change your transaction details in the transaction receipt.

3. Find a quick resolution to customer complaints and identify solutions

It is important to be aware of around seven possible causes for chargebacks. Most of them are dealt with before reaching the dispute phase by providing excellent customer service.

If you hear a complaint from a customer regarding the quality of the product, its quality, damage caused by the process of delivery, or other issues take note of them and work with them to fix the issue, and avoid chargeback.

4. Contact the company before completing an order that seems to be suspect.

It's one of the most effective methods for preventing fraud. As a smart business manager, you must review your orders at the first sign of risk or fraud.

If you do not receive any response, particularly after repeated attempts or if the telephone number isn't valid, consider refunding the order without sending it to you.

Many other processors provide some sort of fraud detection measures, however, they're not necessarily as user-friendly. With Payments, it's right in the middle of each transaction. There's no need to be in contact with your credit card company for all day.

5. You must possess proof of delivery

When possible, this can prove to be a valuable document that you can use in the event that a customer claims the item never came. Examples are tracking the shipment specifics, needing an order to be signed upon delivery, photographing the product that was delivered and and so...

6. It is imperative to clearly state the policy

Your policy regarding the return, refund, or cancellations will affect the customers you serve. to your customers. Make them part of the receipts or invoices you mail out. Incorporate them on the most important website webpages including your checkout pages. Place them on display in stores. Better yet, have the person who is using your card confirm or sign to acknowledge that they are accepting the terms and conditions you promotion.

7. Use accurate product descriptions

The descriptions of the product must be in line with the item. If a customer receives an item that isn't the item they believed they purchased, they may contest the charge since they'll believe you shipped customers the incorrect item.

Pay attention to the smallest of details. Don't skimp.

8. Get rid of items that are no longer available or are discontinued.

Remove items from your online store that are not available, so buyers don't need to purchase items they can't receive. It's possible to do similar for products that are not available, if you're able to quickly and effortlessly place an "out of stock" image on relevant pages for the product and update the status as it changes.

out of stock settings in

9. Be wary of international purchases

Certain kinds of fraud occur in the world of everyday life in which orders coming from specific areas could have a greater likelihood of being the victim. It is recommended to select an option with the ability to detect fraud in order to reduce the chance of being a victim, for instance payment fraud.

10. As much information about your customers that you are able to

It's not mandatory to every business have shipping data However, you should collect it nonetheless. It can be used to verify the credit card holder is the person they say they are.

When you make a purchase, you'll need the following details:

  • The name of the client
  • Customer email
  • CVC number on the credit card
  • The billing address and postal code are the full information.
  • Delivery address, if different with the bill address

11. Tracking information for your shipment

It is important to be punctual in the time of delivery. After a client has placed an order and received the email with tracker details whenever feasible. Then, they'll be notified regularly. This can be a great option to establish when the buyer states that they haven't had the item.

Strengthen your defenses against fraudulent charges

Are you seeking to enhance the detection of suspicious transactions? It's only one advantage from the use of payment services. This allows companies that accept payment keep their name and image and boost profits.

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