Common Chargeback Reasons Explained
We have previously discussed chargebacks in depth here on our blog, however we thought we would take this opportunity to discuss a few of the most common reasons for receiving a chargeback, and what you can do to hopefully prevent them from occurring in the first place. The two we will focus on here are Services Not Provided or Merchandise Not Received, and, Not as Described or Defective Merchandise. These two are by far the most common types of chargebacks for merchants to receive, either legitimately or by accident.
Chargeback Reason: Services Not Provided or Merchandise Not Received
This type of chargeback occurs when the card issuing bank receives a claim from the cardholder that merchandise or services requested where not received or the card holder canceled the order as the product or services where not received within the anticipated time frame. Some of the reasons this chargeback would be received are:
• Issues with fulfillment centers or drop shippers
• Shipping delays by the carrier
• Not fulfilling in a timely manner
• The merchandise was not available for pickup
• The services or product where misrepresented by the merchant
There are a number of ways to combat these types of chargebacks such as using only reliable and reputable fulfillment centers or drop shippers. Always try to provide the end consumer with realistic time frames for fulfillment of the product or service, don’t tell them it will be 3 business days for receipt when it will realistically be 5-7. Always try to be fair and transparent in your marketing of the products or services so there is not miscommunication regarding what they are receiving for their hard earned money. When selling physical products always use reliable shipping providers and get a delivery confirmation from them in case the consumer says they did not receive the products (for higher ticket items, requiring signature delivery or delivery confirmation may be a good idea as well). Another good way to combat some of these is to use the tools at hand to verify what you can on the transaction, for example the Address, Zip code and the CVV/CVC code on the back of the card, read more here about using AVS & CVV Filters.
Not as Described or Defective Merchandise
This Chargeback reason is used when the end consumer feels that they did not receive the merchandise as it was marketed or the services where not rendered to their satisfaction. It can also be received when the customer takes delivery of defective or damaged products and the merchant has not made sufficient action to remedy the problem. It should be noted that for this type of chargeback to apply the card holder must have attempted to resolve the issue or return the merchandise. It can also occur when the merchandise has been returned but the merchant has not issued a timely refund. Sending the wrong merchandise or substituting items without disclosing the changes to the card holder can result in this chargeback being received as well. This chargeback reason can also be used in the case of quality disputes (i.e. Poor accommodations or faulty auto repair). Some of the things that merchant can do to prevent this type of chargeback are:
• Always make sure the marketing material is easily understood, clear and transparent – misrepresentation (either intentional or accidental) is the most common reason for this chargeback to be received
• Ensure that a qualified shipping partner is contracted to prevent damage during transit
• Always make sure the end consumer knows what they are getting for when they pay for a service – set their expectations appropriately
• Consistently attempt to resolve any issues that the card holder has
• Offer refunds on returned merchandise in a timely manner
• If there is a restocking fee for returned merchandise – always make this clear at the time of purchase
• Whenever possible confirm the contents of the shipment are what the customer wanted
By following these steps a credit card processing merchant can greatly reduce the amount of wrongful chargebacks. Remember the burden of proof is on the merchant in the case of a chargeback so doing everything you can to verify the consumers intention and their information will be invaluable. If something sounds fishy or off about a transaction pick up the phone and call the consumer to confirm their information and order. The 5 minutes it takes to do this on suspicious or odd transactions will easily pay for itself in the prevention of chargeback fees and the lost time it takes you to dispute them. As always if you have questions or comments regarding chargebacks and the dispute process please feel free to contact us.