I’m a High Risk Merchant. How Do I Lower My Chargeback Ratio?
Many times, a merchant or industry is deemed high risk due to their high chargeback ratio. But what exactly is a chargeback? Simply put, it is when a customer (the cardholder) disputes a charge to their card issuer/issuing bank. For example, a customer purchased a shirt from an online retailer and was charged for it; however, they never received the item. In the best case, the customer calls the merchant and they can resolve it together. In the worst case, the card holder will call their card issuer and the issuer will validate the complaint, once the issuer has validated all points the issuer will then initiate a chargeback for one of many reasons and the funds will be automatically taken from the merchant and given to the card holder until the merchant proves its case.
You may have been told by a processor that you need a high risk merchant account, or perhaps you have noticed yourself, that your business has a high chargeback ratio, or you just want to reduce the chances of having any chargebacks at all. Here are some quick and simple tips to do just that:
- Mandate the use/match of address verification service. (AVS)
- Mandate the use/match of card security codes (CVV, CVC2, CID) to verify the three digit security code on the back of the card.
- Make sure your descriptor (what a customer sees on their credit card statement) matches the name that your business is known as or the website the customer purchased from, a customer service phone number within the descriptor is also a great way to make sure your customer calls you first.
- If possible, obtain the cardholder’s signature or imprint of the credit card at time the sale is made.
- If you are ecommerce, ensure you have a very clear Terms and Conditions, and Refund Policy (in minimum of 12 pt font) and add a check box to have your customer agree they have actually read these and agree to them.
- Always keep your customer up-to-date on the status of their purchase, including any delivery information.
- Only ship products to the cardholder’s billing address.