Credit card chargebacks are never a good thing. They happen whenever dissatisfied customers initiate the refund process.
As the merchant, not only do you lose the sale, but you also pay fees ranging anywhere from $20 to $100 for each chargeback. The best way to protect yourself is to become proactive. When customers have legitimate complaints about your service, you should refund their money as quickly as possible.
But what about when those complaints aren’t legitimate?
- Sometimes customers forget about making purchases and don’t recognize the transactions on their credit card bills, so they initiate chargebacks.
- Other times, the purchases are fraudulent. In 2016 alone, fake charges were responsible for more than in losses — a statistic that doesn’t include all the time and money associated with disputing each fraudulent claim.
It gets worse. The rules governing chargebacks often work against you.
Chargebacks and Consumer Protection Laws
Most chargeback regulations have their origins in the Fair Credit Billing Act of 1974. These rules were originally designed to make it easier for customers to dispute the quality of products and services received.
Despite these noble intentions, it is very easy for today’s customers to abuse the system. For example, they can dispute charges for almost any reason — including older transactions from past billing cycles. Initiating the chargeback process is as simple as clicking a button online, so there’s very little thought or work involved.
Given this ease and convenience, it isn’t surprising that chargebacks are on the rise.
If you decide to challenge a claim, your chances of success aren’t good — about 60 percent of disputed chargebacks work out in the customer’s favor.
However, this could soon change.
How Credit Card Companies Are Now Approaching Chargebacks
Some of the major card brands have begun exploring ways to make the chargeback process more transparent for all affected parties.
For example, Visa’s new claims resolution platform (VCR):
- Streamlines the dispute process by automatically throwing out false or weak claims submitted by customers
- Speeds up the resolution turnaround time. It used to be 100 days. Now it’s closer to a month
- Requires that credit card issuers provide more detailed records upfront. This helps to eliminate much of the back-and-forth that accompanies chargeback disputes
The other major brands are launching similar platforms with the same goal — i.e., making it harder to abuse the system by shifting greater responsibility onto customers and their card-issuing banks.
Whether these changes succeed remains to be seen. However, the best way to protect yourself is to reduce the frequency of fraudulent charges in your business.
This is where BluePay can help.
In addition to PCI-compliant payment processing, we also specialize in a range of fraud protection tools to keep your business safe.
Some of our more popular solutions include: