As a professional photographer, chances are you don’t have an immense wealth of knowledge when it comes to payment industry regulations. However, that subject is one in which what you don’t know can hurt you.
What is a Chargeback?
These days, chargebacks are most commonly associated with online transactions, but they do still occur for card-present businesses.
A chargeback is essentially a kind of bank-enforced refund. The practice is based on old payments industry infrastructure dating back the early 1970s and intended as a way of encouraging consumer confidence in credit cards. Essentially, a chargeback gives the cardholder the right to request that a transaction be overturned either because of criminal fraud or an error on the part of the merchant.
Technically, those are the only two justifiable reasons why a cardholder should be granted a chargeback. Unfortunately, cardholders often attempt to dispute chargebacks without proper justification—a practice known as “friendly fraud.”
It’s important to distinguish between these loss sources so as not to lose funds unnecessarily due to groundless and excessive chargeback claims.
When is a Chargeback Justified?
Practices which fall under the umbrella of criminal fraud are relatively straightforward. This could mean that the customer used stolen cardholder or account information, or in some other way managed to impersonate a cardholder. There is little one can do to avoid a chargeback if they process a transaction which is later found to be the result of genuine criminal fraud.
So, what does it mean to receive a chargeback due to merchant error? There are several different potential chargeback triggers here:
- The customer didn’t receive the correct number of proofs.
- The proofs arrived late / did not arrive at all.
- The customer was billed for the incorrect amount, or is accidentally billed twice.
- Services did not represent what was contractually promised.
- Customer attempts to contact you to resolve any above issue, with no response.
If any of these are applicable, you might find yourself facing a chargeback resulting from merchant error.
When is a Chargeback Not Justified?
You might assume that most chargebacks fall into one of the above-mentioned valid categories. However, the data suggests that more than 80% of all chargebacks may be friendly fraud cases.
Any of the below-mentioned situations would be an example of an unjustified chargebacks, and therefore, friendly fraud:
- The customer doesn’t like how they look in the picture.
- The entire process costs more than the customer expected.
- The customer didn’t actually read and understand their contract.
- He or she was just trying to get something for free.
- The customer failed to contact you to try and resolve their issues first.
What Can I Do About Chargebacks?
Fortunately, there are steps you can take that will help insulate your business against these largely-avoidable loss sources:
- Create a fair and easy-to-understand customer contract, and have customers sign-off on this before providing any paid services.
- Provide top-notch customer service, ensuring you live-up to the expectation of service outlined in your contract—this means appointments, pricing and shipping dates.
- Keep documentation of all interactions you have with customers. Save all emails, and keep copies of all written material on-file.
Of course, these preemptive strategies won’t be enough to counter every chargeback case; by its nature, there is no way to really prevent friendly fraud from happening. The only really effective way to deal with a problem like friendly fraud is to consult with a professional chargeback mitigation service.
If you’re in the market for a solution to fight back against friendly fraud, as well as to help prevent chargebacks resulting from other loss sources, we recommend you check out Chargebacks911. As this Chargebacks911 review points out, they are widely established as the industry experts regarding friendly fraud prevention.
Just remember—if you’re facing a real chargeback problem, fighting back is not a lost cause. With the right tools and insight at your disposal, you can quickly make chargebacks a thing of the past.