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Chargeback got small business owners pissed? 4 proven tips to reduce risk now

Updated: Feb 1

Virginia small business owners are no strangers to chargebacks.

Virginia Entrepreneur's Workspace
If only dealing with chargebacks was this serene...

From the moment they swipe their card, small businesses know that there is a risk of losing money if something goes wrong with their customer's purchases. Virginia small business lawyers see all too often the frustration and losses small business owners face when dealing with chargebacks.


With a little knowledge and creativity on the small business owner's part, it is possible to reduce this number substantially. This post will discuss how small business owners can fight back, decrease their number of chargebacks, and keep more money in their pockets.


Chargeback got you pissed?

Learn how small business owners can reduce the rate of chargebacks in this blog post!


Be available

If a customer has an issue with their purchase, typically the first thing they do is complain to you as the business owner. The problem is if they can’t find your information, they will complain to whoever is easier to complain to: their card issuer.


You can probably stop the chargeback with some old-fashioned customer service. Each chargeback claim is a small business owner’s chance to explain what happened.


Make sure small business owners are available for communication or have some way for customers to contact them directly when they need help resolving an issue.

Resolved customer complaints always mean fewer chargebacks.


Understand the merchant dispute codes

When you get your first chargeback, pay attention!


Typically, the reason for disputing a transaction is listed as one of four different 'merchant' dispute codes: authorization, quality, or description disputes; cardholder non-approval charges, and more.


You need to understand what your merchant dispute code is when a small business owner files a chargeback. In short though, knowing the right one will help many entrepreneurs win that fight. This article by Chargebacks911 for additional insight for Visa's specifically. But remember each card carrier has their own codes, so make sure to find the codes for that specific card carrier.


Once you identify a code popping up once or twice, you can adjust your payment process to make it less of an issue. For example, if you are seeing an authorization code coming up because small business owner's don't know to include their CVV for e-commerce purchases (which would definitely help), then make sure to turn on the setting in your payment processor that requires a CVV code. If your payment processor doesn't have that option, then maybe its time to look for a new payment processor.


Collect compelling evidence

Pen and notebook used to collect compelling evidence to fight a chargeback

Once you know what the dispute code is, you'll have to fight it. And because chargebacks involve peoples money, the banks and credit cards take it VERY seriously.


In fact, so seriously that you have to prove to the bank or payment processor that the charge is valid like you were in court, so

  1. Collect enough customer information with your payment processor to prove that the customer is tied to the payment.

  2. Have a strong contract or terms visible at the checkout page. They can be linked to the page, but then you want to make sure you have that checkbox that makes folks check it before they can put in their credit card information. Finding software that has these abilities is necessary for any creative entrepreneur who wants to be creative and not deal with these nasty fraud claims regularly.

If your small business owner payment processor doesn't automatically provide information about the customer's purchase, you'll need to collect it yourself. Talking to a business lawyer about not only what contracts to have in place, but what processes can be used to build that compelling evidence in the background without more work from you is always gonna help.


Which leads to one specific way your process can help....

Be able to track if product was accessed or used

  1. This part is easy for physical products. You shipped it. If it's significant in cost, get insurance and proof of delivery.

  2. For digital products, it helps to find a way to know if a customer logs in to software that hosts the digital product. Then you have proof that your client accessed your training, course, of program.


Read the small print before signing up for services.


Make sure you are protected from fraudulent claims and chargebacks. Your payment processor should be able to provide this, but not all do. Since contract law says their terms of service that you agreed to control the details of your relationship, it's also a good idea to read through their terms of service just to know exactly what protections they are providing you. You don't want to get on bad terms or a business dispute with the company that allows you to get your money just because a client had buyer's remorse or a change of heart.


CEO Tip: Use Captcha to prevent bots from placing fake orders. Find a way to turn that on in your techstack.

As small business owners, we know that time is money. So make sure you've got all the facts and figures on your side when fighting a chargeback - it could cost you!


 

If you don't know if you've got everything lined up, just want to see if InLine is the right lawyer for you, if you even need a business attorney, or to figure out the next steps for any legal issues, then check out our Ask A Lawyer session. It's 75 minutes with a Virginia small business lawyer for a flat fee so you can figure out the next steps and walk away confident that you've got everything in place.

 

**Disclaimer: This is only general information, not legal advice specific to your situation, and does not create a client-attorney relationship with Samantha Bradshaw or InLine Legal, a Virginia licensed law firm. If you need legal advice, please contact a lawyer in your area.


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