Chargebacks take time to process, and often result in lost inventory, along with incurring fees from payment processing providers.
Receiving a large number of chargebacks is bad for business and a sign that your business needs to update its purchasing process to make things easier and clearer for buyers.
Small businesses can reduce the number of chargebacks they receive by taking a few simple yet effective steps, from writing clear return and refund policies to sending detailed order confirmation emails.
Today, we’ll go over six of the best chargeback prevention strategies.
- Make Sure Your Policies Are Clear
- Describe Your Products in Great Detail
- Send Order Confirmation Emails
- Have a Clear Billing Descriptor
- Be Clear About Shipping Details
- Offer Great Customer Service
Make Sure Your Policies Are Clear
Customers often initiate chargebacks because they can’t figure out how to request a refund or cancel their subscription.
They might be unhappy with your service or frustrated with your lack of guidance and thus decide to deal with this issue through their credit card provider.
This is a form of “friendly fraud”—chargebacks caused by reasons other than typical credit card fraud.
To combat this common cause of chargebacks, make sure that your return, refund, and cancellation policies are clearly stated, well known, and, if unknown, easy to find on your website.
Clear policies encourage customers to use the correct channels for returning a product or canceling a subscription.
For example, imagine if a customer was annoyed about receiving a dysfunctional product.
If they could quickly find the directions for issuing a refund request on your website, they’d likely follow that procedure. If not, they might just take the easy way out and file a dispute.
To make your refund and return policies as straightforward as possible, include the following information on a webpage that users can easily navigate to on your website:
Source: Housecall Pro
Often, companies create a single webpage on their site that is dedicated solely to helping customers learn about returns and refunds.
While service-based businesses may have refund policies, it’s unlikely that they’ll have return policies, seeing as though you can’t return a paint job or a concert.
However, they might have subscription cancellation policies if they use a subscription model to charge customers with recurring billing.
As a rule of thumb, it’s best to give your customers step-by-step instructions on how to cancel a subscription.
Here’s an example from HBO’s help center for canceling a subscription:
The directions are simple to follow because they tell the reader exactly what to do. In this example, HBO even tells users what to expect after submitting their cancellation request.
The odds of a user becoming confused and deciding to dispute the charge are slim.
In sum, clarity around your policies is one of the best ways to avoid chargebacks for your small business.
Describe Your Products in Great Detail
Another leading reason for chargebacks is customer dissatisfaction with a product or service. Customers might dispute a charge when it doesn’t live up to their expectations.
Perhaps they receive a t-shirt that’s too tight on them or a deliverable that doesn’t match their expectations from a finished product.
You can stop this from happening by creating detailed product descriptions on your website and online store so that customers know exactly what they’re buying.
Even if they’re disappointed that a t-shirt they ordered feels constricting, they likely won’t dispute the charge if they knew beforehand from reading your product page that these shirts “run slightly small” and are “tight-fitting around the chest and waistline”.
Here’s an example of a great product description from Etsy for a mug:
It tells buyers exactly what to expect, from its size and materials to whether it’s microwave and dishwasher safe.
Plus, it sells the mug a bit in the description paragraph, which is always a nice touch.
It’s not hard to imagine a mug seller whose mugs aren’t microwave-safe and who failed to mention the fact in their description and, in consequence, received numerous chargebacks from dissatisfied customers who wanted microwavable mugs.
This example brings us to a best practice you can follow to improve your descriptions over time.
In a Google Doc or notes app, start to write down the reasons your customers give you for returning a product or requesting a refund.
If you can’t update the product or service to reflect their unmet desires, word the description in such a way that will prevent the wrong people from buying it.
If, for example, a business owner sold an abridged version of Pride and Prejudice from their online bookstore and people kept complaining about not receiving the full-length version, that’s a sign that the word “abridged” isn’t sufficiently articulated or explained in the product description.
The seller should put “abridged” in bold lettering or all caps to make this feature clearer, and perhaps give a quick definition of abridged.
Sure, they might lose some sales, but they’ll also prevent chargeback issues for their business.
Along with detailed descriptions, companies should also include clear photos or videos of the product from different angles if possible.
Not only does this tempt users to buy the product but it also manages their expectations, resulting in fewer refund requests or chargebacks.
The photos of the Etsy mug we previously mentioned are examples of helpful photos:
The seller shows their mugs in action, stacked how a buyer might stack them in their cupboard. Plus, the plain gray background focuses the eye on the products.
Whenever you can, try to depict your products as they are when someone is using them.
For instance, REI shows a person wearing their backpack so buyers can see exactly how the straps work and how the bag looks:
When you use sales messaging that tells customers what to expect, and then deliver on that expectation, you greatly reduce the chances of chargebacks and unhappy customers.
Send Order Confirmation Emails
Sending automatic order confirmation emails whenever a customer makes a purchase will increase the customer’s knowledge about the purchase and reduce the chances they file a dispute against it.
Also, if a customer feels like a charge on their card statement is suspect, they can look up your company name in their inbox and see that they have, in fact, ordered something from your business.
They’ll realize their mistake and won’t issue a chargeback.
Your order confirmation email should contain details of the purchase, such as the transaction date, the subtotals, the total cost, the expected delivery date, and the items purchased.
Here’s an example of one from Allbirds:
Further, your confirmation emails should include an attachment of your invoice and your customer service team’s contact information so that customers can easily reach support.
That way your team can resolve issues before they become chargebacks.
Some online payment platforms will have an email communication feature set.
For instance, Regpack allows you to set up email automations that will automatically send personalized confirmation emails to customers once they’ve made a purchase.
Automating this process takes the pressure off of your team and ensures that confirmation emails are always sent at the right time to the right person and include the right information.
Like great product descriptions and clear policies, descriptive and immediate order confirmation emails reduce the number of chargebacks by keeping your customers informed about their order status.
Have a Clear Billing Descriptor
A billing descriptor is the explanation of a transaction that appears on a customer’s credit card statement.
Below are examples of several billing descriptors like “Starbucks – Lime Ave.” and “Google”:
It’s best practice to use your business’s trade name as the billing descriptor. This avoids the situation where a customer reads their statement and doesn’t recognize a purchase.
That customer mistake most commonly occurs when the name that appears on the customer’s credit card statement is different from the business name your customers recognize.
For example, if a business advertises itself as “Remy’s Painters” but uses “Paint USA LLC”, as their legal business name, on their billing descriptor, its customers might not recognize the charge.
Ultimately, it’s always smart to use the name that your customers are most familiar with, whether that’s your “doing business as” name or your legal business name.
If they’ve seen it on your website or in your correspondence, they likely won’t question the validity of the charge.
Further, take advantage of the “city” field and fill in the name of the town where your store is located or your website address. This will also help jog the buyer’s memory.
Be Clear About Shipping Details
One of the most common circumstances in which customers dispute charges is when they mistakenly think that their order was never shipped, that it will arrive late, or that it was lost in transit.
Stop this from happening by being clear about your shipping details.
Provide your customers with information on the carrier, the estimated time of arrival, the delivery address (especially if that is different from their place of residence), and tracking numbers.
Ideally, you should send this information to them in an order confirmation email after they make the purchase.
Sometimes companies will include links to “Order Status” that customers can click to track their order, as Chewy has done below:
Furthermore, tell your customers who to contact if there are any problems or concerns with shipping and how to do it.
This ensures that buyers use the proper channels instead of disputing a charge.
It also gives your customer support staff a chance to intercept any frustration before it manifests as a chargeback.
To further reduce the chances of a chargeback, and improve their customer payment experience, some companies even send email updates to customers once their order reaches certain milestones in the delivery.
For example, the email below informs customers that they’ll send another email once the item has been shipped:
Note the exactness of the above shipping details. TOBI even explains what they mean by 2 business days, stating that it excludes sale days, holidays, and weekends.
In sum, giving your customers access to clear shipping details reduces the likelihood they make a false assumption about their order status that leads to a chargeback.
Offer Great Customer Service
Customer service is often your best weapon against chargebacks.
A capable team of service reps can help customers figure out shipping, product, or billing issues and stop them from filing charge disputes.
Of course, to offer great customer service, you have to first tell customers how to get in touch with your support team.
Share information about phone numbers, hours of operation, email addresses, live chat options, and other ways to get in touch.
And place this information on your website, order confirmation emails, invoices, and email signatures.
This ensures that customers will easily find it. They won’t give up and just dispute the charge.
Most companies dedicate an entire page on their website to customer support and choose it as a menu option so that customers can easily learn how to get in touch, as Kern Family Health Care has done below:
Source: Kern Family Health Care
If, like Kern, you offer a customer portal with self-service tools, be sure to remind your customers about this option.
That way, they can figure out smaller issues on their own without talking to a service agent.
Some businesses link out to their customer portals or support pages in their order confirmation emails, as BlueHost has done here:
The linked text stands out from the plain text and allows customers an easy way to learn more about customer support.
In sum, making it easy to reach customer service is an essential practice for reducing the number of chargebacks your small business experiences.
As a small business owner, you want to mitigate chargebacks and the problems they cause. Often, chargebacks occur because a customer is mistaken or confused.
Therefore, the best and fastest way to reduce your chargebacks is to increase the clarity surrounding your customer support, refund and return policies, shipping details, and other areas related to the purchase.
If you’re a service-based small business that wants to see how online billing and email automation can help you solve or prevent a chargeback problem, reach out to Regpack to learn about their online payment software.