A Chargeback is when a consumer calls their bank to dispute a credit card charge. This consumer is using a “dispute resolution process,” put in place by the credit card networks in order to deal with a merchant who failed to fulfill their obligations. Ironically, most of the time this consumer made no attempt to contact the merchant and is abusing a system put in place to protect them.
There are good chargebacks and bad chargebacks. Generally speaking, a good chargeback, or legitimate chargeback, happens when either the merchant failed to deliver on a promise made to their customer, or when a stolen credit card was used. A bad chargeback, or illegitimate chargeback, happens when the consumer fails to deliver on a promise made to the merchant, i.e., payment, or if they are trying to defraud that merchant.
Yes, consumers commonly engage in what’s called online theft. How many times have you been flipped off on the freeway versus flipped off to your face? When human interaction is removed or abstracted, we somehow feel better about behavior that we would never otherwise consider. Within the industry, we refer to online theft as friendly fraud. The overwhelming number of chargebacks filed by consumers are usually an attempt to steal from merchants, or to circumvent their return policies.
Your best offense against chargebacks is through your customer service department. This is where you can make the largest impact. If your business is experiencing high chargebacks you should evaluate your return policies and your customer service handling. Treat your customer like a king and they will return the favor over and over. Friendly fraud is a hostile act taken against your business. Why would your customer do this? This is the question you need to figure out.
When your customer first opens their credit card statement, emotions are high; they begin questioning every charge. At this time, your best hope is your customer has positive feelings about your company and it’s products. If you are REI, Nordstrom, or Southwest Airlines, you are in good shape. If you are United Airlines, or worse a company providing limited or questionable value, your best bet is that they can find your contact information instantly, and that your customer service answers quickly. These are a few ideas to think about.
If you would like help with chargebacks, or to explore your customer service handling, feel free to drop us a line at email@example.com.