Every merchant dreads the news that a customer has disputed a purchase, leading to a chargeback. When this happens, not only do you lose the revenue from the sale, but there is also a chargeback fee as well as the possibility of further negative consequences.
What are these potential further consequences?
If you experience multiple chargebacks your credit card processor could raise your processing fees or even block your ability to accept credit and debit cards altogether. If you are classified as high risk, the consequences could include:
- Higher fees: This could include increased setup fees, chargeback fees and payment gateway fees.
- Rolling reserve: This means that your payment processor setsaside a portion of your funds for a period of time. For instance, 10% might be held back and not released for 90 days.
- Minimum reserve: In this case, you must constantly keep a specified amount in reserve with your payment processor before funds are paid out to you.
For both financial and reputational reasons, taking steps to avoid chargebacks is vital for any merchant. However, even if you’ve taken steps to reduce your chargebacks, they can be hard to avoid altogether.
For this reason, merchants who experience chargebacks should do everything possible to reverse any chargebacks they feel are invalid or unwarranted.
Chargebacks occur when cardholders take a dispute to their card-issuing bank instead of contacting the merchant. The reason could be that the product, according to the customer never arrived, or it was stolen before it reached them, it was purchased fraudulently, etc.
These types of legitimate chargebacks are generally not worth disputing. However, in other cases, a merchant may believe that the customer’s claims are not valid – for instance, they claim never to have received a product, but you have proof that they did. These chargebacks may stem from a mistake on the part of the customer or may be so-called “friendly fraud,” where the customer goes around your refund policies and contacts their card issuer first.
Whatever the case may be, given the damage chargebacks can cause to a merchant, if you suspect friendly fraud, you should take steps to reverse the chargeback and reclaim your revenue.
How to Reverse a Chargeback
If you are hit with an unwarranted chargeback, you can request that it be reversed. There are strict deadlines for how much time you have to file you claim, so be sure to act as quickly as possible. Typically, you must dispute a chargeback within 45 days.
Through a process called representment, you re-present your transaction along with supporting evidence to your merchant bank to make your case. They forward the case to the issuing bank. If the issuer concludes that a chargeback was not justified, they will reverse it and the funds involved will be returned to your account.
The following tips can help you successfully reverse chargebacks:
Chargeback Reversal Tip #1: Make Sure Your Documentation is Complete
The letter you send to your bank requesting that a chargeback should be reversed, known as a rebuttal letter, should be accompanied by all relevant documentation. This should include any delivery receipts, records of contacts with the customer, and any other information that supports your claim. Your refund policy should be included as well to demonstrate that the customer didn’t have to ask for a chargeback to resolve the dispute.
Make sure the letter clearly explains the facts of the transaction and explains why the evidence shows that a chargeback was not warranted. If you don’t hear back from the bank after a reasonable amount of time, you may want to follow up with them to see if there is any further information you can provide about the claim. The reference number for the chargeback should be visible on all the documents you file.
Chargeback Reversal Tip #2: Support Your Claim with Compelling Evidence
Telling your bank that you have a hunch that a chargeback was invalid won’t cut it when it comes to boosting your chances of reversing a chargeback. You need compelling evidence that an error has been made.
What type of evidence can help your claim?
Sales receipts, records of delivery, video or audio recordings can provide strong support for your claim. If the customer claims they never received a product, submitting a delivery receipt with their signature on it can serve to counter their claim.
Customer communication records can be valuable evidence as well when it comes to disputing claims that an item was stolen or lost in transit. Interactions with customers should include the date, time, and names of all those involved.
In cases where you resolved a dispute with a customer, but they filed for a chargeback anyway, record that information in your documentation. If you can prove that the customer’s billing address matches their shipping address via your CRM, the AVS match proving that should also be included as evidence.
Chargeback Reversal Tip #3: Hire Chargeback Reversal Professionals
Given the high stakes involved in the chargeback reversal process, for many merchants, it makes sense to work with chargeback management professionals. Firms specializing in this field will generally charge a percentage of the reversals that they win. For merchants pressed for time, using experts can be worth it from a financial and time management standpoint. Hiring professionals to help with chargeback reversal can save you the time involved in researching the process to make sure your representment claim is in good order and writing a rebuttal letter that hits all the right points to increase your chance of success.
Chargeback Reversal Tip #4: Use a Chargeback Management Solution
Dispute management platforms integrate multiple tools to deal with transaction disputes. For representment, they should integrate the merchant’s transaction stream, including their shopping cart, gateway, CRM and fulfillment data. This integration matches compelling evidence to the disputed transaction for automated rebuttal letters.
Dispute management platforms also integrate Visa and Mastercard dispute resolution tools. Verifi Order Insight (Visa) and Ethoca Consumer Clarity (Mastercard) actually send your compelling evidence in real time to cardholder statements. This helps your customers recognize purchases and prevents friendly fraud from escalating into the disputes that cause chargebacks.
These integrations streamline the representment process, saving you time and reducing the likelihood that you will forget something when submitting your claim.
While most chargeback prevention solutions offer support for card-not-present chargebacks, some don’t include features to help you fight card-present claims that occur at brick and mortar stores. Merchants with a physical presence should look for a platform that can help them reverse both types of claims.
Chargeback Reversal Tip #5: Benefit from Experience
Each encounter with a chargeback gives you the opportunity to learn from the experience and improve your chances to successfully reverse future chargebacks. You may find that different processors take different approaches and learning this can help your reversal rate going forward.
Avoiding chargebacks and boosting your ability to successfully reverse them when they occur necessitates a comprehensive strategy. Simply saving transaction records or disputing only charges above a certain amount does not guarantee success.
Make sure to keep track of the chargeback reason codes that accompany each chargeback you receive. Tracking which codes occur most often will help you home in on the areas where changes may need to be made operationally to reduce chargeback frequency.
The best anti-chargeback strategies generally focus on identifying and taking action to prevent chargebacks from happening in the first place as much as possible. This is why it’s vital to understand why a customer has filed for a chargeback. You should also check the customer service records, if any, associated with a chargeback.
If the customer reached out to you what steps did you team take to try and resolve the issue? By carefully monitoring all aspects of chargeback activity, you can take proactive steps to deal with the situations most likely to lead to chargebacks.