What can you do to prevent and manage Payback Disputes, Chargebacks, or Payment Disputs
Sometimes, when running an online store, you make a sale however, you later get a demand notice. This usually happens weeks sometimes even months later the initial transaction. You'll have administrative issues to take care of and the possibility of losing revenue from the sale, and less time to focus on running your company.
Though this may be not a frequent occurrence, if it happens frequently, important partners like credit card companies could start to fine you, or impose more stringent rules or cut ties with your business.
It's good to know the proactive approach to avoid disputes and handle them when they do occur keeps your shop free of headaches. Even better news? There is all you require to know from this article.
Table of Contents
- What exactly are dispute or chargebacks?
- Why do chargebacks and disputes happen?
- What merchants should do to address disputes
- What to do when you receive a payment dispute
- You must respond immediately
- Provide documentation
- Submit requested evidence
- What will happen if you don't reply to chargebacks?
- What is a threshold of dispute?
- What can I do to reduce the number of disputes that my store receives?
- 1. Use a clear bank statement descriptor
- 2. Put company info on transactions receipts
- 3. Resolve customer complaints quickly and find solutions
- 4. Make contact prior to fulfilling any an order that appears to be suspicious.
- 5. Make sure you have proof of delivery
- 6. State clearly the policies
- 7. Use accurate product descriptions
- 8. Remove discontinued or out-of-stock items
- 9. Be cautious with international orders
- 10. Gather as much information from customers as possible
- 11. Send shipment tracking information
- Strengthen your defenses against fraudulent charges
What is a dispute? What are chargesbacks?
The payment dispute can happen whenever a customer contacts the credit card company they use to dispute a charge on their bill. The credit card company takes these claims seriously and, if they decide that the cause to dispute is legitimate the company will issue a temporary credit to the customer's account while the dispute is resolved. It's also known as a chargeback.
How come disputes and chargebacks happen?
Two main reasons for disputes over payment:
- Dissatisfied customers
- Fraudulent card activity
The two will be discussed in greater detail some time later.
At first glance, you would think you'd be more in control of this one than the other. However, the truth is that you have some control over both, as you're about to discover.
How merchants should respond to disputes
There aren't any payment disputes that one can simply put off and hope that they disappear out of your life. They won't. By ignoring them, you'll create problems that will affect the longevity of your shop.
The card networks monitor the rate of disputes (the proportion of transactions that are confirmed to disputes) and could charge more costs or penalize you when your situation isn't favorable.
What should you do if you receive a payment dispute
This is what you should do when you get a dispute with your payment notice:
Take action immediately
If the network of your credit card initiates an inquiry, you should respond immediately. If you're using Payments You'll be alerted of any disputes through emails and an inbox message within the dashboard.
In the absence of a response in a fairly short amount of time leads them to assume that you aren't planning to challenge the claim. Each card network has their individual timeframes to determine how long the dispute investigation is open. However, you'll need take care to gather the right evidence when providing the required evidence prior to the deadline expires.
If you're using PayPal, you'll be able to log in easily the dashboard of your store to reply to the complaint.
Provide documentation
In the next step, give solid and unambiguous proof of the transaction in question. The evidence should include the credit card's number (or the truncated version), the date and value of the transaction, and the order information or evidence of delivery stored.
This helps them rule out any fraud possibilities, and ensures that everyone has the same understanding of the situation.
Submit requested evidence
Along with the standard documents, the network could request additional details regarding the transaction. If they don't, you should send the required documentation anyway. Taking the time to gather the necessary documentation will be well-spent however, make sure that you've got everything in order and sent it before the deadline.
The type of documentation that you provide will be contingent upon the type of dispute that you're having. There are at minimum seven types of payment disputes:
- The refund wasn't processed
- Multiple charges
- Fraudulent charges
- Charges that are not recognized
- Product not received
- Product unacceptable
- Subscription canceled
What happens if you fail to react to chargebacks?
Chargebacks might seem intimidating or challenging to manage. However, it's an important element of running a shop with a simple set of steps that can save you a lot of stress. Credit card companies still want your business to succeed while protecting their users, so work within the guidelines to keep your good name.
If you opt to completely ignore chargebacks, however it can be difficult. This is the sequence of unchecked or unchecked chargebacks
The first thing you do is lose income and profit from the sale, and you must be charged a cost plus the loss.
After that, if your dispute numbers start to increase and you fail to keep them under control, your card network may impose fines or more fees until you get the chargeback percentage to a lower level. If the problem persists and you are unable to access your sales, they could block you to accessing certain portions of the sales you earn. In the end, they may end your ability to accept payment, as well as mark your account as high risk.
It could stop other card networks from doing business with the company. And if you can't accept payment online, it's impossible to manage your business properly.
It's true that this is an extreme case. You can completely avoid it if follow the correct actions.
What is a dispute threshold?
The threshold for dispute, also known as the the threshold for chargeback is the method that the card networks employ to help in deciding when to raise monitoring and penalities on a merchant or business in order to decrease their dispute rate.
What is the rate of dispute?
The "dispute ratio" is the amount of disputes that are disputed per total processed transactions in the time frame for example, a week. In other words, if you have 500 transactions processed over the course of a week, and only five of them were disputed and five were not, you'd have an average of 1% for the dispute rate for that week.
This differs from "dispute activity', which is the percentage of disputes that occur in an arbitrary timeframe regardless of the date for processing.
It's the difference that disputes don't happen until weeks or months after purchase. The process that disputes encompasses. You might get five disputes during a single week, but if three of those relate to purchases earlier in the week, then the rate of dispute would include the two from that week, but the dispute activity will include the entire five. Here is more from Stripe about calculating disputes.
The credit card companies typically utilize the activity of disputes to determine their levels of dispute. Each card network has its own threshold. The threshold could be based on dispute activity as well as the volume of dispute or, in the case of more frequent disputes the two.
In particular, Visa will increase their charges against businesses with more than 100 chargebacks one month, and 0.9% disputes. But Mastercard's dispute threshold begins at 1.5%.
The volume threshold is useful for small businesses, because even if you receive only fifty payments during a month, and one of them gets disputed the amount is already at 2% rate. So the volume threshold keeps smaller companies from having to pay more severe penalty.
If you're using Pays and have questions about the best way to handle issues, it's always possible to contact the customer Support team to get help.
How can I reduce my online store's dispute rate?
Once you know how disputes are made Here are some ways to decrease the amount of disputes that you face.
1. Use a clear bank statement descriptor
An explicit statement description informs the buyers where they bought an product. This can help reduce the number of claims resulting from charges that are not recognized. The company will see your details and be aware that it's a legitimate purchase they wanted to purchase.
If a client notices the charge on their bill and is puzzled by the charge and wants to contact us directly instead of filing an appeal with the credit card company, and you can resolve it with the credit card company.
2. Add company details on transaction receipts
Similar to the descriptor for banks, providing your customer clear, easy-to read company information on their receipts increases the chance that they'll call you in the event of a concern and not their credit card company.
Include the name of your business address, phone number, physical address, website, logo along with a brief message on customer service. And be sure this doesn't interfere with the transaction details in the receipt.
3. Response to complaints from customers promptly and seek solutions
Be aware that there are at minimum seven causes of chargebacks. Several can be resolved before getting to the dispute stage by providing good customer service.
If a customer is unhappy with a product its condition, damages in the delivery process, or any other issues, you should listen to them, and then work together to resolve the problem and avoid charging back.
4. Contact the company before executing the order in question.
This is one of your most effective tools for preventing fraud. As a knowledgeable business proprietor, you need to examine your purchases in the event of any sign of fraud or danger.
If you don't receive a response, particularly after repeated attempts, or if the phone number seems to be not valid, think about refunding the purchase without sending it.
The majority of other payment processors have the possibility of a fraud detection measure, however they're not always as easy to use. With Payments, it's right on top of each transaction. There's no need to sit on hold at your credit card provider for the duration of your time.
5. You must provide proof of delivery
If you can, this will be a solid piece of evidence you can use in cases in which a buyer claims that their order never arrived. Some examples include tracking shipment details, requiring an order to be signed upon delivery and taking a picture of the final delivered item and so on...
6. It is imperative to clearly state the policy
Your policy regarding return, refunds, and cancellations affect your customers. to customers. Make them part of the invoices or receipts you send out. Feature them on key website pages, such as the checkout page. Put them on display in stores. It's even better to get the cardholder to sign or acknowledge that they agree to the conditions.
7. Use accurate product descriptions
The descriptions of the product must match the actual product. If the cardholder is sent something not the product they were expecting, they may contest the amount because they'll think they received the wrong product.
The details matter. Don't skimp.
8. Take out items that are no longer in stock or discontinued.
Take items off your online shop that are no more available so customers can't order items they will not get. You might consider doing the same thing for items that are that are out of stock, but only if you are able to easily and precisely put an "out of stock' icon on your product's pages, and keep up with changing the status as it shifts.
9. Be wary of international purchases
Certain kinds of frauds are an unfortunate reality in this day and age, and orders from some areas could be at a greater threat. It helps to choose a payment solution that includes the ability to detect fraud in order to reduce the risk of fraud, for instance payments.
10. Collect as much customer information as you can
Not every business needs to have shipping data However, you should collect it nonetheless. It can be used to verify that the cardholder is who they say they are.
Each time you make a purchase, you will need these details:
- Name of the customer
- Customer email
- CVC number printed on the card
- The full billing address as well as the postcode
- Shipping address, if different from billing
11. Send shipment tracking information
Be prompt with the delivery of this. When a client places an order, they should receive an email with the tracking details whenever is possible. After that, they should be provided with regular update. This serves as more evidence in the event that a buyer claims they never received the item.
Strengthen your defenses against fraudulent charges
Are you looking to increase your detection of risky transactions? That's just one benefit that Payments offers, and it helps online businesses accept payments, preserve their reputation, and maximize the profits they earn.