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Why Your Business Might Be Getting Chargebacks

Updated: Jan 7

Chargebacks are serious when it comes to your business- not only do they cost time and money, but they can literally put your merchant account at risk of being closed! Since we have already covered what merchant are and have given a brief overview of how the process works, today we’re going to dive into why you might be receiving chargebacks plus the proper measures you can take to prevent them. Understanding and staying on top of your chargebacks is a crucial part in becoming (and maintaining) a successful business.


Most Common Reasons for Chargebacks

Chargebacks can happen for a variety of reasons- so recognizing the most common causes can help with mitigating future incidents.


Unknown charge: when a cardholder notices an unfamiliar charge on their card statement they may be inclined to chargeback. Most of the time this is a result of a payment descriptor that they might not associate with your business or product. The best way to prevent this type of confusion is to either post what your payment descriptor will show as on their credit card statement (preferably somewhere on the checkout page) or by having the descriptor reflect the business/product name along with a customer support number they can contact should this situation arise.

Fraudulent charge: fraudulent transactions can also trigger chargebacks. This happens when cardholder’s information lands into the wrong hands and is used for purchases they are not aware of. The best way to counter fraud is to make sure that additional cardholder information is required at checkout to provide more security. You can make sure these extra fields are prompted in your shopping cart by easily adding them through your Align eCommerce gateway.


Undelivered goods: sometimes the product may not have been delivered or delivered to the wrong address. Sending an email confirmation or transaction receipt to the cardholder gives the customer a chance to catch any accidental typos in their delivery address. If you need help creating a proper transaction receipt you can see a great example here.


Wrong product: and speaking of accidents, being a busy business owner or using a fulfillment center to ship your goods can lead to the wrong product being sent. If this occurs be sure to bring attention to the mistake so that the fulfillment center can be more attentive with future orders.


Product not as described: whether it’s the customer being dissatisfied with the goods or services they received, or if the product wasn’t as described, this is another common reason for chargebacks. It’s important to be as descriptive and straightforward as possible when listing your products.


Billed twice: sometimes a customer is billed twice- which can happen when the purchase is initially declined so the cardholder tries to run the transaction again. The best way to prevent this is by learning how to avoid declines. Understanding why declines happen and then working to avoid them can help avert unnecessary chargebacks.


Unfortunately, once a chargeback is filed, the ruling stars in favor of the cardholder. As the merchant, if you would like to dispute a chargeback you will need to form a dispute case (and we can show you how to do that here). The more chargebacks you have, the higher risk your business will be deemed- which means you will end up paying higher processing fees as a way for the processor to cover their financial liability for taking care of your chargebacks. You’ll want to keep your chargeback ratio below 1% to keep you from being categorized as a high-risk merchant and to avoid paying those extra fees associated. To put it simply, lower chargebacks = lower processing rates.


If your merchant account is in danger of increasing chargebacks, find out how Align ecommerce can help you monitor and reduce your risk by contacting us today!


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