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How to lower chargeback rates

Analyzing shopper behavior in our system, the most frequent chargeback reasons fall in one of the following categories:

  • Customers dissatisfied with the product/service
  • Customers haven't received the product/service access
  • Customers don't recognize the transaction on their account statement

Keep in mind that when chargebacks occur, the transaction value is not the only sum that you lose. You also need to pay extra fees, such as:

  • Operational costs for the resources needed to fight the dispute together with our team
  • The Avangate commission, non-refundable even if the customer loses the dispute
  • The Avangate chargeback fee (if applicable).

Additionally, continued chargeback requests exceeding certain thresholds defined by VISA, MasterCard or American Express subject you to chargeback monitoring programs.

Statistics show that bad customer experience news reaches over 100% more potential customers than a good customer experience praise. This leads to a high number of negatively influenced potential customers who won't buy your products, even if they haven't had any experience with you as a merchant. Word of mouth is a powerful tool to skew buying decisions.

Avoid chargebacks and improve the overall experience offered to your customers by following a few guidelines:

  1. Understand the chargeback reasons. 
  2. Offer a high quality product or service. Low quality products and services are at the top of the list when it comes to chargeback reasons. If your customers feel that they did not receive the product or service that they expected, they are likely to attempt to get a refund. Further down the road, if they can't get in touch with you, or if you refuse to provide a refund, they might request a chargeback.
  3. Offer clear product details. Use clear and concise product descriptions together with screenshots or demos that your customers can watch to learn what to expect after purchasing the product/service.
  4. Be transparent about your billing policy. Customize your statement information and inform your customers about the data they should see on their credit card statements upon purchase and/or billing. Keep in mind that they could receive their credit cart statements weeks after the initial purchase, depending on your billing cycles, so make sure to tell them where their money goes!
  5. Provide flawless customer service. Make sure your customer service contact information is easily accessible on your website. Additionally, provide contact information in your order confirmation emails. Keep track of customer inquiries and communicate with them before purchase if they need extra information. You can greatly reduce the chance of chargebacks if your customers can easily get in touch with you and get the issue resolved.
  6. Cancel inactive auto-renewing accounts. Keep an eye on the usage history of your customers' purchases. There's no point in renewing a subscription that hasn't been used in the past 6 months (or more). Avoid chargebacks in these situations by notifying your customers about their inactivity before you charge them for another billing cycle.
  7. Offer easy to use self-service features. Your shoppers can keep an eye on their order status and disable auto-renewing subscriptions through Avangate myAccount.
  8. Offer refunds and be transparent about it. The whole point of chargebacks is to protect your customers against fraud. Naturally, chargeback policies are developed in favor of the customer. Chances are that if someone isn't satisfied with your product or service, they will get their money back, whether you like it or not. So why not spare yourself the hassle and refund the orders that don't rise to the customer's expectations? Make sure to inform the customers when the refund should be processed and how long it should take before they get their money back.
  9. Confirm customer identity. Use advanced tools, such as 3-D Secure and Address Verification System. Enrollment in 3-D Secure prevents your customers from asking for chargebacks.
  10. Join chargeback alert networks. Issuing banks that are part of a network will alert you when their cardholders file disputes for your transactions. This way, you can take action and offer refunds before the dispute takes place.

Implemented accordingly, these guidelines should help you lower your chargeback rates and improve the overall customer satisfaction level with your products or services.