Chargebacks are a small business owner’s worst nightmare. And if you know what that is, the mere mention of the word can send a shiver down your spine!
What are chargebacks and why should you be so scared of them?
Say a customer buys one of your products online with a credit card and you ship it out to them. If they are not happy about something, they may just go over your head and dispute the charge with their credit card company. The charges are then reversed, you are stuck with the processing fees, and the customer probably doesn’t even return the product. Triple whammy.
To make matters even worse, you may be responsible for a “chargeback fee” which can usually range from $20-$30 a pop. Companies like Visa and Mastercard have guidelines about how many chargebacks are acceptable for a merchant to receive and there are strong penalties if you exceed that number. If your chargeback rate is high, your account may be shut down and put on the MATCH List, which will make it extremely difficult for you to have a merchant account with anyone else.
How Can Chargebacks Be Avoided?
Chargebacks usually happen as a result of a customer feeling like they’re not being taken care of. Fix that by offering:
#1 Impeccable Customer Service
Having kind, courteous store representatives make it very difficult for any customer to be disgruntled – because they feel taken care of. Figure out the best way of enhancing your customer service to generate a positive feeling around your business.
#2 Prompt Responses
Remember that buying online can be a little scary for folks. They’re putting in their credit card number to a website – without a physical store to go to. Show them that you are not shady by providing support online and over the phone. If you are just starting out and can’t be answering calls all the time, make sure you get back to the customer as soon as possible.
#3 Return Policies
Have a return policy in place to protect the customer (and yourself). Customers should be able to return goods if they are damaged or not the right thing. If you don’t have a return policy, the customer may just rethink the purchase and dispute the charge, which will be costly for you.
Of course you can’t prevent all chargebacks, but you can significantly minimize them by being diligent with the above points. Strong customer satisfaction is not only key to repeat purchases, but also making sure there aren’t any hiccups with the ones you already have. Be prepared. Set guidelines for yourself and your staff to stay on top of things and you will not become a casualty of the dreaded chargeback!