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Covid and the Rise of Chargebacks

Accepting credit cards is an essential factor in operating a business that many take for granted. The payment industry often centers around payment processing rates, programs and equipment.

But what if a credible, popular and well-established business suddenly has their ability to accept credits cards jeopardized?

As chargebacks rose to unprecedented heights when orders could not be fulfilled during COVID, this became an unfortunate reality for many businesses selling online.

Chargebacks are defined as transaction disputes between cardholders and a business. The card brands have established chargeback thresholds before consequences follow:

Approaching a rate of 1% is considered excessive.

At 3%, a business is likely to be classified as high-risk resulting in skyrocketing payment processing fees.

If a merchant has excessive chargebacks, the processor could be required to place them on MATCH. This would make it challenging to accept credit cards for years to come.

With fulfillment challenges still lingering, there are some simple and often overlooked steps that online businesses can take to minimize chargebacks:

  1. Ensure your customer service number appears in your business descriptor so it displays on the customer credit card statement. This helps your customers easily inquire rather than disputing the transaction. Monitoring customer hold times can also be crucial in preventing chargebacks.
  2. Increase communication with your customers. Always email an order confirmation and if possible, integrate your CRM with the fulfillment provider to automatically communicate any delays.
  3. Utilize Address Verification Services and 3DS 2.0 to minimize chargebacks based on fraud. AVS ensures that the billing address matches the bank statement of the cardholder. 3DS 2.0 allows card issuers to authenticate consumers in a frictionless checkout process.

And last but not least, always ask for CVV on your check-out page.

I hope you found these tips useful in protecting your business against chargebacks.

Written By: Allison Montgomery, Director of Credit