Retailers can reduce debit card chargebacks by encouraging direct refunds, providing top-level customer service, keeping clear return and refund policies, being transparent about charges and subscriptions, and getting help managing chargebacks. Because debit transactions withdraw funds immediately, customers want fast resolution and are often willing to work with the merchant. Proactive processes keep disputes from reaching the bank.
Every merchant knows what a hassle credit card chargebacks can be. They’re expensive. They’re time-consuming. They put a drain on resources. And they put a business’s reputation and credit card processing ability on the line.
It turns out debit card chargebacks aren’t much better.
Customers initiate most debit card chargebacks for the same reasons they do credit card chargebacks: A fraudster has made purchases using the card number or a customer wants a purchase reversed due to an issue with the merchant.
Because there’s never a good time for e-commerce merchants to be on the receiving end of a chargeback, retailers must take an active role in setting up the processes and implementing procedures that will help minimize them. Here are five ideas for getting started.
When a customer feels like a transaction just hasn’t gone right, they often seek out a refund. And when it comes to getting that refund, they have two choices:
If a customer takes the chargeback route, it could take as long as 45 days to get their money back from the bank — and that’s if the bank rules in the customer’s favor.
Here’s why the refund approach can help merchants reduce their chargeback levels.
When customers make a debit card purchase, the full amount of the transaction is immediately withdrawn from the customer’s bank account. When a transaction goes wrong, the customer usually wants a faster return of funds to their account. And that means they’re more willing to contact and work with the merchant to arrange a refund.
Another incentive customers have to request a refund over filing a chargeback is that customers usually have an increased financial liability for fraudulent purchases made with a debit card. That means even if they file a dispute and are successful, they may still be ineligible to receive the full purchase price back from their bank. With a refund, they can recoup more of the purchase price.
For merchants, issuing a refund instead of representing a chargeback also means they avoid the time, effort and money that’s required to fight a chargeback — a fight that’s often a losing proposition on their end. Refunding a customer is also a gesture of goodwill that helps keep the merchant’s good online reputation intact.
When a merchant is known for its timely, friendly customer service, customers are more likely to contact the merchant directly to resolve an issue rather than heading straight to the issuing bank to file a chargeback. This gives merchants the opportunity to defuse the situation and avoid having a filed dispute raise their chargeback ratio.
Here are a few strategies merchants can implement to improve customer service and reduce their debit card chargeback risk:
Customers frequently turn to chargebacks as a way to help themselves to a refund if they’ve missed the return or exchange window on an order. But merchants who are clear and upfront — and even flexible — about their policies can encourage customers to avoid disputes and reach out when they have an issue with a purchase.
Merchants should ensure these policies are available from all product and checkout pages, and links to the policies should also be included in all customer correspondence.
Because the money in a debit card transaction comes out of the customer’s account immediately, customers don’t want to be surprised by any unexpected withdrawals. And if a withdrawal ends up being larger than the customer expected, that could be enough for a customer to file a chargeback.
Luckily, avoiding chargebacks can be simple with just a little communication.
If customers have enrolled in a subscription program or have other recurring billing charges, merchants should regularly notify customers about upcoming charges. Similarly, if customers make a purchase that requires an authorization hold (like a hotel room), ensure they know the total amount of the hold and how long the funds will be held. Providing this information can mean the difference between an unpleasant chargeback and an amicable transaction.
The best defense against debit card chargebacks is a good offense — and that should consist of the same strategies merchants are already using to prevent credit card chargebacks. But even these strategies aren’t foolproof, and sometimes debit card chargebacks do happen.
That’s why you need to implement a solution that can help protect your business from the financial and reputational effects of fraud and chargebacks. But picking the right solution for your growing e-commerce store isn’t easy. That’s why the experts at ClearSale developed the Fraud Protection Buyers Guide. This easy-to-read, easy-to-use guide walks you through your available options and helps you confidently make the right decision for your business. Download it today, and start preventing debit card chargebacks from affecting your business.
Customers initiate most debit card chargebacks for the same reasons as credit card chargebacks: a fraudster made purchases with the card number, or the customer wants a purchase reversed due to an issue with the merchant.
A bank chargeback can take as long as 45 days, and only if the bank rules in the customer's favor. Because debit funds are withdrawn immediately, customers want a faster return and are more willing to contact the merchant for a refund instead of filing a chargeback.
When a merchant is known for timely, friendly service, customers are more likely to contact the merchant directly than to file a chargeback with the bank. Offering multiple contact channels, responding promptly, and training staff to resolve issues all help.
Customers often use chargebacks to get a refund if they missed a return or exchange window. Clear, upfront, and flexible policies, available on product and checkout pages and in correspondence, encourage customers to reach out instead of disputing.
Because debit funds come out immediately, customers do not want surprise withdrawals. Regularly notifying customers about upcoming subscription charges and disclosing authorization hold amounts and durations can prevent unexpected charges that trigger disputes.
The best defense is a good offense using the same strategies that prevent credit card chargebacks. Because no strategy is foolproof, retailers should also implement a fraud and chargeback protection solution to limit financial and reputational damage.