How can I prevent chargebacks?
A chargeback, also sometimes known as a payment dispute, is meant to be a form of cardholder protection as they allow cardholders to dispute possible unauthorized charges. Chargebacks can occur for a few reasons such as: a cardholder files a claim with their financial institution when they are not satisfied with their purchase and unable to resolve the matter with the merchant, or when they claim the transaction was processed without their authorization.
As a merchant, it is important to know how to reduce legitimate chargebacks and eliminate illegitimate ones. Here are some ways to prevent chargebacks:
- Transact in person when possible: Unauthorized activity is more likely to happen when transactions are made without a physical card. Transacting in person, while following best practices such as collecting a signature and checking the card for signs of tampering (e.g. damaged magnetic stripes, unfamiliar holograms), can significantly reduce the likelihood of unauthorized payments and chargebacks.
- Avoid manually keyed transactions: Manually keyed-in transactions can increase risk. If possible, have cardholders check out online or send them an online payment link.
- Clearly describe refund/cancellation policies: Make sure your refund and cancellation policies are clear and easy to find. Ideally, your refund process should be easier and more straightforward than the process of filing a chargeback.
- Ensure you have a transparent fulfillment policy: If you are unable to fulfill a customer’s order as described in your fulfillment policy, it is always good practice to notify your customer of the timeline adjustments to avoid a dispute:
- If you are shipping a product to your customers, they should be aware of when to expect their product to be delivered.
- If your products are on backorder, your customer should be notified of this before they make their purchase.
- If you provide your customers with a service, your customer should be aware of your timeline to fulfill these services.
- Clearly describe products and services: Cardholders not receiving what they expected is one of the most common reasons they file a chargeback. Clear product and service descriptions help prevent this: provide photos from multiple angles and include information about quality, color, size, weight and processing time. Adding information about what is not included can be just as important as what is included.
- Reduce anxiety during processing times: Clearly explain processing timeframes during the checkout process so the cardholder is aware of when their product will ship.
- Make it easy for customers to contact you: Provide multiple points of contact so the cardholder can get in touch however they prefer. If you have delayed response times, this should also be clearly explained with your contact information. If you are difficult to reach, they may contact their bank instead.
- Check the billing descriptor: Run a test transaction and check your bank statement to see what a cardholder would see when purchasing. Check the statement on your bank’s website, instead of an app, which may be inaccurate. Make sure your business name is correct to reduce chargebacks from cardholders who may not recognize the transaction.
- Ensure charges are accurate: Re-check the transaction amount before charging to avoid the appearance of overcharging or deceitful billing practices.
- Do not re-run charges on declined cards: If a card is declined, ask the cardholder for a different payment method or have them contact their card issuer. Having multiple declined transactions can have an impact on your merchant reputation.
- Keep detailed records of every transaction: Detailed records of a transaction are invaluable when winning a chargeback dispute. Keeping written agreements or digital acknowledgements of interactions between you and your customer can help protect your business. Information that may be asked for during disputes may include, but are not limited to:
- Signed invoice/order receipt containing order details and cardholder information
- Proof of delivery or that the service was rendered
- Proof that the cardholder was aware of cancellation/refund policy at the time of the sale
- Proof that credit has been issued
- Be on the lookout for chargeback notifications: If you receive an email from GoDaddy with the subject line GoDaddy Payments Chargeback Notification, please respond to this email immediately with all information related to the transaction(s) being disputed.
- Learn more about how to dispute chargebacks.
- View my transactions, including transaction statuses.
- Why was my customer's credit card declined?