How to Respond to Buyer Chargebacks
A chargeback is a reversal of credit card charges that occurs when a customer asks the credit card company to reverse a transaction that has already cleared. In many cases, it represents a genuine concern on the part of the customer: an item that he never received, for example, or a stolen credit card that has been used fraudulently. In other cases, however, the buyer might use the chargeback option on his card to get a piece of merchandise without paying for it. As a business owner, you should know how to respond to buyer chargebacks properly.
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Instructions
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Give the buyer the benefit of the doubt. While you needn't trust the buyer blindly if he issues chargebacks, there may be a perfectly legitimate reason why he chose to. Follow up on that reason diligently but courteously with the credit card company and refrain from making accusations until you are confident of the results.
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Ask for specific reasons for the buyer chargebacks. In most cases, the buyer will need to cite something specific (items never arrived, charge made fraudulently, etc.), which you can respond to and determine whether the problem lies within your organization or comes from somewhere else.
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Maintain a clear paper trail for any and all transactions. If you conduct them in person, be sure to get the buyer's signature and proper authorization. If you conduct transactions online or over the phone, sign up for a card verification service that can note discrepancies in cardholder information. Experian has recently added card verification to their highly respected financial services (see Resources below).
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Present the records clearly to the bank and never leave anything out. If you feel you have a case to reverse any buyer chargebacks, you should present everything you have to them and cite specific reasons why they should be dismissed.
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Check the chargebacks for possible scams. It behooves the sensible businessman to understand different types of credit card fraud and to check buyer chargebacks for signs of them. The types of scams are myriad; talk with fellow business owners about the kinds of scams they have seen, and study chargeback information at websites like Website Publisher (see Resources below).
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Note repeat chargebacks and report them if you spot them. Some buyers may play the chargeback card regularly and often. If you can note repeated use of the tactic from a single cardholder, you may be able to dispute the claims more easily.
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Tips & Warnings
The sad fact of the matter is that chargebacks are a reality in most lines of business, and with the way the system is set up, the merchant often ends up paying the price for chargebacks. The best way to respond to buyer chargebacks is to prevent them in the first place, by keeping your sales policies clear and responding quickly to refund or replacement orders.
