If you know why consumers do chargebacks, you can work on preventing them. Chargebacks are one of those things that you should pay attention to as a business owner/operator. They cost you money and higher chargeback rates mean customers are unsatisfied.
The first step to solving the problem is defining the problem.
- The purchase was made with a stolen credit card
- The product never arrived
- The merchant shipped the wrong product
- The product isn’t what I expected
- The product didn’t match the description
- The order was billed twice
You should be able to work on way to reduce each of these. There is no silver bullet, so make small improvements gradually and see your numbers improve. Also read about ways to reduce chargebacks.
Now if you do reduce chargebacks, it saves you money due to chargeback fees (normally $25) and it also shows you’ve improved customer satisfaction. In the end, a chargeback is a customer complaint. The last tangible benefit of reducing chargebacks is that you can decrease your processing rates. Higher chargebacks mean higher risk. Therefore, you’ll be charged higher processing rates if you’re higher risk. Any business with a chargeback rate of 1% or greater (chargeback rate = # of chargebacks / total # of transactions) mark you as a high-risk merchant.
Read more about merchant risk and why processing rates are sometimes higher.