Small business owners have enough to contend with. Rising costs eat away at profits. Competition eats away at market share.
There are customer service issues and hidden issues like chargebacks. Chargebacks are refunds given to customers because they disputed a charge.
Your business gets impacted because you don’t have the expected cash flow and you pay fees on top of the chargeback.
This cost businesses about $30 billion in 2020. If you want to protect the financial health of your business, you need to prevent chargebacks.
Keep reading to find out the common reasons for chargebacks and what to do to prevent them.
1. Customers Didn’t Recognize the Charge
There are chargebacks that really shouldn’t get approved. Sometimes, customers are adamant that they didn’t make a purchase.
This occurs when a business has a registered name and a DBA. Your payment gateway uses your registered name, not the DBA.
Make customers aware of that when they check out.
2. Friendly Fraud
Friendly fraud isn’t actually that friendly. It’s a type of chargeback that customers use to deliberately defraud your business.
They make a purchase with the sole intent to recoup those costs in a chargeback.
How can you protect your business? Prevent friendly fraud by delivering products on time and meeting customer expectations.
You can’t give people an excuse to make a chargeback. That’s how it will get approved.
3. Actual Fraud
Actual fraud is when someone steals another person’s payment information and uses it to make a purchase.
This is becoming more common as ecommerce becomes the norm. Payment information gets stored in dozens of different places.
Your best defense is to use credit verification methods and a secure payment system. Look at your orders and report suspicious activity to the bank.
4. Recurring Subscriptions
Recurring payments are a great way to ensure steady cash flow. The problem arises when customers forget to cancel their subscription or they don’t do it in time.
They’ll do everything they can to get the money back.
Prevent these chargebacks by sending renewal reminders to customers 7-10 days prior to renewal. When customers sign up for a subscription, clearly state the terms and conditions.
5. Employee Error
Employees are human beings. They can make mistakes. They could make a data entry error that overcharges a customer.
There are customer service issues that could trigger chargebacks as well.
A sales rep could promise something to a customer and you can’t follow through on it. These are preventable errors.
Prevent Chargebacks in Your Business
You count on the funds in your accounts to make business decisions. A sudden chargeback plus bank fees could cause disruption and turmoil in your business.
If you want to make sure your business is ready to go, you have to know why customers dispute charges and prevent chargebacks from happening.
You just learned the top reasons for chargebacks in this guide. You’ll be able to apply them in your business.
For more helpful insights to grow your business, check out the blog today.