February 26,2009
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News: Protecting Small Business from CC Chargebacks.
Credit card ‘chargeback' is a ‘dirty word' in business because it almost always translates to ‘loss'. Some are legitimate while, others are not. If legitimate then, shame on the business. If they're not legitimate, however, it turns out that many small business don't know how to protect themselves. ‘Chargebacks' are incurred on a business when a credit card lending bank rejects a business charge in favor of refunding their consumer-client. When this happens, the business is slammed with a penalty fee, not refundable in any case. Many times, credit card chargebacks are inadvertent errors. In these cases, the best approach is to call the consumer and inquire of the matter.
Often times, the name that comes up on the consumer's credit card statement is not recognized and collecting payment is simply a matter of straightening out the confusion. Other times, the consumer is simply dissatisfied with something (like long hold-times when trying to resolve.) Many times the credit card chargeback can be resolved by a little diplomacy and a little better service. Still, there will be times when the consumer is either not placatable or is trying to take advantage of a situation.
In the case of on-line transactions, merchants are at higher risk if they don't have a signed agreement from the customer. This is especially a problem where services or electronic products (digital transfer) are concerned. In practice, it turns out that the merchant is not well protected from credit card chargebacks in these cases.
If a customer cedes that the charge was legitimate after all, they can call their credit card lender and have the chargeback reversed. One way to avoid a lot of confusion in the first place is to make known to the customer at time of purchase, how the charge will show up on their statement. Another way is to contact your ‘Third-party Processor' and have a notation added to the message the consumer will receive.
Beyond that a slugfest may ensue. A ‘stitch in time' gives the best track record. Before making an expensive credit card sale, either find a way to get the transaction signed or contract with an intermediary such as PayPal, who strive to be fair to both sides. There is a fee for their services but, where high-dollar transactions are concerned, it may be worth it.