4 Root Causes for Chargebacks

Chargebacks can be both frustrating and costly for your business. It is essential to offer credit card payment options, and you can expect that chargebacks will come with this service. But it doesn’t mean that you have no control over the chargebacks that happen to your account.

A chargeback happens when the customer contacts their credit card issuer or bank to file a dispute on the transaction. The person is requesting a refund through the financial institution, instead of through your business. Most often, chargebacks happen when the person sees a charge that they don’t recognize, or if they are dissatisfied with the product or service for some reason.

Common Causes of Chargebacks

Understanding chargebacks can help you reduce the risk of this problem. Here are some of the most common reasons why customers file disputes:

  1. Fraud: In some cases, the customer is looking for a way to cheat the system. The person purchases a product or service, then files the chargeback so they can have the product for free. It is estimated that 60 – 90% of chargebacks are the result of fraud.
  2. Fulfillment Problems: Sometimes the person files a dispute because they never received the product or there was a defect with the purchase. These issues might occur because the shipment was sent to the wrong address or poor-quality control checks were used.
  3. Customer Service: If the customer was promised a refund or a payment cancelation and they didn’t receive the money back, then it is likely that they will contact the financial institution to file a dispute. Other customer service issues might increase the chances of chargebacks, such as a long wait to talk to a representative or poor operational policies.
  4. Subscription Cancellation: Do you offer a subscription-based service? The customer might file a dispute if they are unable to cancel the subscription through your customer service team.

Learning these common causes of chargebacks can be helpful for your business practices. You can identify the weak points in your system and make changes to prevent the risk of these issues in the future.

If you are looking for assistance with improving your payment processing system, then we are here to help. Contact our experienced team at any time for personal recommendations.

By |2019-03-05T14:47:09+00:00March 5th, 2019|Credit Card Security|