Chargebacks happen: learn how to handle them effectively
This post was last updated on April 6, 2023.
Whether you sell online or in stores, chargebacks are an unavoidable part of accepting credit card payments. And with chargeback fees costing merchants between $20 to $100 on average, customer disputes can pose a risk to your profits if they’re not managed well.
Fortunately, there are steps that you can take to help reduce your risks and handle chargebacks with minimum hassle. For starters, you can use Wix Payments to accept payments online, chargebacks, and order issues in one place. Then, follow the tips below to get a better grip on customer disputes.
Chargebacks vs. refunds
Chargebacks are, quite simply, disputes between the merchant and customer, in which the customer requests their money back through their banks. Sounds like a refund, right?
Well, not exactly. Unlike a refund, which is a direct interaction between the customer and merchant, a chargeback is a demand from a bank that the merchant return funds to the customer.
There are many different types of chargebacks, and in most cases, a chargeback is requested when the customer feels they have a right to dispute the transaction. While this goes a long way to protect the customers’ rights—for merchants, it can be quite frustrating. This is why Wix Payments allows merchants to dispute chargebacks “in-house”, which we’ll cover more in a bit.
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Common causes of chargebacks
Some of the most common reasons for chargebacks include:
Fraud - In this case, a customer will claim that they were charged without their knowledge. If you have proof that they agreed to be charged, you should dispute the chargeback.
Products or services weren’t provided – In this instance, a customer will claim that they never received your product or service. To help avoid this, make sure to keep your customers informed about when services will be provided, or when products will be shipped and delivered. This can help pinpoint where the problem lies, and how you can improve your services moving forward.
Products are faulty or not as described - What you deliver to your customers should be exactly as described and pictured in your product pages. Whenever there’s a difference, even a small one, your customer may feel they’re not getting what they paid for.
Tips for merchants from American Express: - Clearly display your return policy and require the card holder to acknowledge your Terms and Conditions. - Send tracking information and confirmation once the order ships. Be sure to provide expected delivery date and notice of any potential delays. - If a delivery is delayed, immediately send the card holder a notification of the new expected date of delivery.
What happens if I get too many chargebacks?
The reality is that too many chargebacks can cause you to be classified as a “risky merchant” by your bank or payment provider. Becoming a high-risk merchant can also mean changes to your payout policy, additional verification steps, and even the closure of your Wix Payments account.
Whatever the reason for chargebacks, following best practices and using smart tools to handle them will help ensure that all the work you put into your online business doesn’t go to waste.
Make sure that you keep track of how many chargebacks you have, or what’s referred to as your chargeback ratio. This ratio is calculated according to the total number of chargebacks per total number of transactions. The industry standard for chargebacks is 1% (or less than one chargeback for every 100 completed transactions).
While there are several factors that could impact your business’ risk level, keeping your chargeback ratio low is one aspect you can easily manage. There are several methods you can put in place to help ensure that number stays as close to zero as possible.
How to keep chargebacks to a minimum
There are a few things you can do to help lower your risk of getting chargebacks, as well as handle any chargebacks you get more effectively.
Make sure your product info is accurate. Your customers are less likely to dispute a purchase if they receive exactly what they order. Write product descriptions that are on point and add images that realistically depict what you’re selling.
Add clear policies to your eCommerce website. Make it easier on customers to find shipping, refund, and cancellation policies so that so they know in advance how you handle these issues.
Customize your statement descriptor. Your online store looks more reputable and professional when your site’s business name matches the name that appears on their bank statement (meaning, your statement descriptor).
Carefully analyze orders that seem suspicious. Chargeback fraud is a real problem. Now that shoppers are spending more money online than ever, you want to ensure that your business doesn’t fall victim to this phenomenon.
Respond to refunds swiftly. Offering refunds to customers is a best practice, especially since COVID-19 has created a lot of anxiety and uncertainty in the world. Wix Payments charges no additional fees when you issue a refund, and offering this to your customers lessens the chance of chargebacks.
Let your customers easily get in touch. Chargebacks can sometimes be a result of poor communication, so make it easy to find your contact details by displaying them clearly across your website. Also, try to respond to customer concerns quickly, and keep your customers updated about shipping, delivery, and any changes to your store policies.
Tips for merchants from American Express: - Provide email notices prior to charges for recurring bills. - Advise customers of policies for returns and cancelations and any restrictions. - Use an “I agree” check box to acknowledge these policies at time of purchase.
Don’t agree? Dispute the chargeback
A chargeback isn’t always fairly filed against a merchant. If you have proof that the payment is valid, you should file a dispute directly from your Wix Payments dashboard. Note that Wix Payments doesn’t charge a fee for this—so feel free to dispute your chargeback claims whenever needed.
When challenging a chargeback, be sure to make a note of its deadline. This is the date after which your chargeback is considered final, and you won’t be able to change its outcome.
Also, get organized: prepare for a dispute by gathering all your documents. Note that they should be in English, as required by most banks that process chargebacks. They should be readable as well, so try to only include high-quality images and documents.
From your Wix Payments dashboard, you can submit all the required documents. If you’re uploading multiple files, they’ll automatically be gathered and compressed into a single file. These may include:
Proof of delivery
Invoices and receipts
Customer communications
Photos showing the customer using the product
Your business’ Terms and Conditions
Your rebuttal letter
Wix Payments’ integrated dispute tool lets you monitor and review your chargebacks’ status right from your Wix dashboard. Track where you stand with every transaction, dispute chargebacks, upload additional documents and more. You’ll additionally get push notifications via SMS and email any time a customer disputes a charge.
For disputes regarding American Express® Card charges, visit the American Express Disputes Learning Hub.
“We understand that businesses have different ways of processing transactions and unique needs when it comes to disputes,” says Tessa Dooley, vice president of U.S. Merchant Marketing at American Express. “To support our merchants, we created a hub at American Express that provides guides and resources to help prevent and manage potential disputes.”
According to American Express, in 2022, there was an increase in the number of transactions made by American Express® U.S. Card Members, but a decrease in the percentage of disputes that reached a merchant.
The bottom line
Whenever possible, it’s always best to try and avoid a chargeback rather than deal with it once it happens. But nearly every merchant will have to deal with chargebacks at some point (even if they followed all best practices to a tee). When this happens, the best way to address a dispute is to respond with the appropriate supporting documents and details by the due date provided.
Every chargeback is unique, and you should handle it as such. Stick to best practices to help reduce your risk ratio and use the tools at your disposal to stay ahead of any issues.
Ready to start selling online? Create your online store today.
Omer Shatzky
Head of Billing & Payments at Wix
Wix Payments Founder
Omer is a seasoned executive—leading tech, business and product groups within the payment ecosystem. As founder of Wix Payments, he’s developed an advanced solution, allowing merchants to manage their business operations and payments solely on Wix.
