How To Avoid and Respond to Chargeback Claims
How to avoid and respond to chargeback claims is crucial for businesses that accept card payments. Dealing with them can be stressful, leading to frustration and financial setbacks—far from ideal.
So, let’s simplify what a chargeback is (sometimes called a payment dispute) and explore ways to prevent them in your business.
What Exactly is a Chargeback?
Navigating the world of banking, payments, and refunds can be tricky, but let’s break it down. A chargeback happens when a client spots a charge on their debit or credit card that seems unfamiliar or incorrect.
This can occur for various reasons – they might not recognize the business name, suspect a security issue, find a discrepancy in the charged amount, or believe they didn’t receive what they paid for.
They then notify their bank to investigate the transaction. If you’re the business that received the payment, your bank temporarily holds onto that amount until the dispute is resolved. It doesn’t go back to the client right away; it’s held in a processing account until the matter is settled.
The bank conducts their inquiry, and usually, it’s your responsibility as the business to prove that the transaction was valid. If successful, the money returns to your account. If the bank sides with your client, they get the refund they requested.
Are Chargebacks Always Legitimate?
Certainly, there are situations where chargebacks are entirely valid. For example, in cases of a lost or stolen card, undelivered items, or technical glitches with the payment service. Sometimes, it’s just a genuine misunderstanding that gets resolved quickly. Typically, in these instances, your client would have communicated with you about the issue.
Regrettably, there are times when chargebacks are used to avoid paying. It might be due to second thoughts, financial stress, or perhaps they never intended to pay in the first place.
Regardless of the reason, whether you’re a business owner or a freelancer, dealing with chargebacks can be frustrating.
Anything Else to Keep in Mind about Chargebacks?
One important thing to note is that chargebacks can end up costing you more than the disputed amount. You may incur a chargeback fee, typically between £5 and £15, to cover the investigation costs.
If you experience a high volume of chargebacks, this could impact the fees your business pays for banking services. In extreme cases, it could lead your payment provider to discontinue your card services, leaving cash as your only option.
Also, be cautious about issuing both a refund and a chargeback (essentially, a double loss). It’s possible for a client to request both, resulting in a double charge against your account. If a client claims they’ve discussed it with their card issuer, it’s wise to verify with the bank.
Can You Take Action Against Chargebacks?
Start by gaining a solid understanding of your banking procedures and how chargebacks operate. Ignoring a chargeback increases the likelihood that the bank will side with the client and return the money to their account. Here’s what you can do:
Use a Service That Handles Chargebacks for You:
If you use Readyhubb, our dedicated team takes care of chargeback responses on your behalf, sparing you from direct back-and-forths with clients seeking a freebie.
Be Transparent About Cancellations or No-Shows:
With Readyhubb, you can clearly state your cancellation and no-show policies. You can also have your client acknowledge and agree to these policies in the event of a chargeback for a cancellation fee. Additionally, the platform allows you to take deposits and charge cancellation fees as per your terms and conditions, ensuring you’re not left out of pocket if a client doesn’t show up.
Maintain Open Communication with Your Clients:
Building a strong client relationship includes being approachable and open about payment issues. When your client feels comfortable discussing any concerns with you, it’s more likely that issues will be resolved before they involve their bank. Mistakes can happen, and how you address them can make a significant difference.
Ready to Reduce Chargeback Hassles with Readyhubb?
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