As a merchant, you’ve got a lot going on. You’re trying to run your business, keep your digital storefront up-to-date, manage employees, stay on top of customer service, and make sure you’re realizing revenue. It’s a lot harder than it looks and small costs can add up to large losses.
This is why it’s important for you to understand chargeback fees and how they impact your business. Too many merchants brush off chargeback fees, not realizing that there is more to chargeback fee than the dollar amount you’re assessed and penalized.
The trickle-down effect of chargeback fees hurts your ability to maintain and run your business. We want you to look beyond the chargeback fee and think about lost revenue, lost merchandise, the time and effort spent trying to fight chargebacks, the damage to your reputation, and your ability to maintain good relationships with your issuers.
Yes, when you add it all up – chargeback fees are costly. The good news is this – chargeback fees are avoidable.
What is a Chargeback Fee?
It’s important to understand that chargebacks and chargeback fees are a universal merchant problem. These fees hurt all merchants, regardless of size or financial status. Chargebacks drain your profits, eat into time that should be spent building your business, and waste resources.
A chargeback fee is assessed to you by your acquiring bank. The chargeback fee is used to cover chargeback-related costs accrued by your acquirer. Depending on your acquiring bank, the chargeback fee can vary from $20 – $100.
Every dollar lost to chargeback fraud costs you an estimated $2.40. In other words, a $100 chargeback fee costs you $240. If you’re a high-risk merchant, you face higher chargeback fees and must pay other program fees – making it even more critical for you to prevent chargebacks.
The more chargebacks filed against you, the higher your chargeback ratio. This chargeback ratio determines your risk factor and ability to process payments. The higher your chargeback ratio, the more unlikely you are to maintain good business relationships with your credit card issuers. (Hint: if you don’t know your chargeback ratio, we want you to contact us and we’ll help you out. This is a very important piece of data that you must know.)
How Can I Prevent Chargeback Fees?
To put it bluntly, the best way to prevent chargeback fees is to prevent chargebacks. Now, don’t walk away in frustration with this blunt answer. Keep reading and learn how you can prevent chargebacks and the subsequent chargeback fees.
It’s worth your time and money to improve your business and payment processes to stop the preventable losses that come with chargebacks and chargeback fees.
- Eliminate customer confusion. Make sure your billing descriptors are clear and obvious.
- Simple return/refund policy. Keep this policy simple and easy-to-understand. Remember to make it easily available to your customers.
- Good customer service. A strong customer service team can prevent the confusion that typically results in chargebacks.
- Know your customers. Use a payment solution that provides insight into your customers, allowing you to stop fraud before it happens.
- Be accessible. Make it easy for your customers to contact you with their problems.
- Clear shipping terms. Require signatures for product deliveries. Ensure your shipping timeframes are manageable.
Along with these better business practices, you can benefit greatly by opening up the lines of communication between yourself, your customers, and your issuers. When everyone involved in the sales process is able to communicate easily, most issues can be resolved without a chargeback ever being filed.
Learning More about Chargeback Fees
Use the following Verifi resource to learn more about chargeback fees and limiting chargebacks. Remember, you can contact us with any questions about chargebacks.
- Chargeback Revenue Recovery
- 7 Mistakes Merchants Make When Fighting Chargebacks
- How to Choose the Right Payment Processing Partner
- Guide to Chargeback Management
- Understanding Who Is Involved in the Chargeback Process