How to Use Refunds to Prevent Chargebacks

It’s wise to offer a refund instead of letting a situation escalate to a chargeback. Since chargebacks can take months to materialize, it’s best to have a system in place so it won’t sneak up on you.

First, you should always track the transactions coming through and keep an eye on anything suspicious. Larger-than-usual orders, strange contact information, many small orders made with the same credit card, and the likes are signs of fraud.

After you’ve noticed these transactions, it’s good practice to contact the customer personally. Confirm that their order is correct. If they respond saying “yes,” you can confidently ship the order, but be sure to keep the message thread in case. If they don’t respond, you’ll need to decide whether it is a better to refund the charges or let the transaction through and absorb the risk later on.

If you refund the charge and the customer responds regarding their order, you can explain the security protocol involved. It’s not just about protecting your brand, you are protecting prospective customers as well. Shoppers like knowing that companies aren’t just accepting suspicious payments. It seems annoying at times, but this will increase customer’s perception of your brand. They’ll know your brand is diligent with security.

Lastly, make sure customers can contact you easily when they need to dispute a charge, request a refund, or voice their opinion. Having the customers come to you first before approaching their credit card issuers or banks will allow you to work out the issue privately, without having it turn into a chargeback and a great hassle.

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