What Are Chargebacks?

Chargebacks is a term that is beginning to be used more and more frequently in the world of online commerce. A chargeback happens when a transaction is reversed. This means that money will be deducted from your account instead of added to it. Why would this happen you may ask. Chargebacks will happen if the credit card is expired, bank error, customer disputes, or double-charging. You could potentially lose your merchant account if there are too many chargebacks against you. Nearly 41% of online merchants have to deal with both chargebacks and fraud in their online business. This number will only continue to rise as the number of merchants online continues to increase. If you do lose your merchant account because of chargebacks you will be placed on a list for several years and will be unable to successfully apply for a new merchant account.

How do you prevent chargebacks from occurring? Here are a few things that can be done to protect your business. First, if you do business off the web, use interactive voice response terminals. They will collect voice authorization from a customer before you ship the order.

Next, collect CVC2 and CVV2 verification numbers which will reduce the probability of chargebacks by over 25-percent. You can also use an address verification system and be wary of orders from developing countries. To avoid customer disputes make sure you let the customer know what name will appear on their statement. If you are suspicious of an order, handle it so. Call or email the customer to verify their order, if the customer is legitimate, the call will be welcomed as it shows you're active in the prevention of fraud. These are the best ways to protect yourself against chargebacks.