The Realities of Credit Card Chargebacks

Within minutes, we can search online, find the product we want, buy it and have it delivered the same or next day. Merchants have an instant customer base and can easily set up a website and integrated payment solution to sell goods and services anywhere at any time. This card-not-present (CNP) sales cycle means that, yes, you can sell to anyone, but it also means you don’t know who you’re selling to. It’s this new dynamic sales model that is contributing to rising numbers of credit card chargebacks.

The reality is that credit card chargebacks can and will damage your business if you don’t take steps to mitigate chargebacks. Whether you’re a new merchant and are currently researching your payment solutions or you’re an existing merchant who has been selling online for years, you need to have a solution in place that protects you throughout the entire sales cycle.

The True Cost of Credit Card Chargebacks

There’s no denying that your business needs to accept credit card payments. But we must reiterate that accepting these payments comes with degrees of responsibility and risk. You’re responsible for knowing and understanding the ramifications of CNP transactions and how this impacts your relationships with your customers, issuers, credit card companies, and third-party investors.

• Standard merchant account agreements state that you are responsible for 100% of the costs of online fraud. This is why you need to have the adequate documentation and means to represent when faced with a credit card chargeback.

• you can’t provide enough evidence to prove that the sale was indeed valid, you’ll be subjected to a loss of revenue, chargeback fees, loss of shipping and delivery costs for the goods, and a change in your chargeback ratio. These costs add up and can’t be ignored.

• Like you, credit card companies want to keep their customers happy. This focus on keeping customers and having them continue to use their credit cards means that more often than not the credit card company will not doubt the chargeback claim.

• One of the best ways to build brand loyalty is with a vocal and positive customer base that is posting positive online reviews. All it takes is one disgruntled customer who posts a negative review for your online reputation to deteriorate.

• The more chargebacks you receive, the higher your chargeback ratio and the greater the risk to the stability of your merchant accounts. Remember that issuers don’t want business relationships with high-risk merchants, and while these credit card chargebacks may indeed be fraud, this doesn’t matter when it comes to your credit risk and chargeback ratio.

This all adds up to you being 100% responsible for understanding how the chargeback process works. This includes understanding how credit card chargebacks impact your business status, having an action plan in place that enables you to respond to chargebacks, knowing who to contact to help you manage the chargeback process, and simply being prepared to protect your business.

Three Chargeback Realities You Can’t Afford to ignore

We want you to succeed, so we want you to know what we know. Take careful note of these chargeback realities:

1. Chargeback fees can and will cost you. Every dollar you lose to chargeback fraud costs you $2.40. Yes, your loss is more than double than the initial charge.
2. Chargebacks drain your resources and time. Don’t overlook the operational demands of credit card chargebacks. Expect anywhere from a 13 – 20% additional cost to your business when fighting and recovering from chargebacks.
3. Your chargeback ratio is vital. The higher your chargeback ratio, the more difficult it is for you to accept and process CNP payments. Do you know your chargeback ratio? How will your issuer respond if your ratio exceeds 1.5%?

 Ask yourself if you’re ready to respond to chargebacks and have the resources, people, knowledge, and infrastructure in place to limit the costs of chargebacks and keep your business succeeding.

Credit Card Chargebacks Don’t Need to Cost You 

It’s okay if you aren’t ready. Simply by reading this blog and browsing our chargeback resources, you’ll be getting ahead and taking the right steps to protect and fortify your business.

Remember that when you have a complete end-to-end chargeback solution in place, you can rest easy knowing that you have taken 100% responsibility for chargebacks and protecting your business. Front-end protection allows you to prevent chargebacks before they happen, and it allows you to keep the associated costs of chargebacks in your pocket. Back-end protection allows you to be proactive and recover any lost profits to chargeback fraud by easily providing you the information you need to successfully fight chargebacks.

Not acting and taking responsibility can and will cost you. The tools, resources, and knowledge are available to you. As a responsible and committed business owner, the onus is on you to take the right steps to prevent and fight chargebacks. Find out your chargeback ratio and start acting on it now.