The dreaded word for high-risk merchant accounts is “chargebacks.” Chargebacks frequently occur because of fraud, customer dissatisfaction with the product or service, or deceptive sales practices, which includes misleading marketing messages.
At Leap Payments, we understand the difficulties faced by high-risk merchant accounts and we work with our clients to provide merchant services for high risk businesses that are the state-of-the-art solutions.
Merchants who operate businesses that are already considered high risk will improve their financial performance of their business by actively managing chargebacks to lower the amount of them. Chargebacks are different from refunds. Refunds are voluntarily given by a company. Chargebacks are demanded by consumers who make a complaint to their credit card company about a purchase. When these disputes are not resolved in the vendor’s favor, a chargeback occurs to the merchant account.
Chargebacks may come many months after the original transaction. This means for high-risk merchant accounts there will be significant holdbacks from credit card processing payments in order to have the cash reserves needed to cover all chargebacks.
Having a strategy to reduce chargebacks makes good business sense. This can also be helpful when renegotiating processing fees and reserve requirements, based on a proven, successful history of lower rates of chargebacks from your business.
How to Reduce Chargebacks
There are plenty of things that merchants can do to reduce chargebacks which include:
- 24/7 Customer Service Availability – The Internet operates non-stop. By providing 24/7 customer service, any troubles that customers have with their purchases can be managed more effectively. Irate customers who need attention are very impatient. If they cannot access customer service to resolve their issues, they will file a credit card dispute. A credit card dispute is an automatic process. Studies have shown that actively managing customer service issues reduces chargebacks significantly.
- Stand Behind Any Guarantee – If your company offers a “No-Risk Money-Back Guarantee,” make sure you honor request for refunds immediately. Do not make the consumers go through nine hells to request a refund. Just honor the guarantee that you prominently use in your marketing messages.
- Free Trial Period – Make sure the free trial period actually allows your customers to try the product or service. Unscrupulous vendors offer a 10-day free trial; however, the product or service is not delivered or available until the 11th day. That kind of marketing strategy creates a major disaster. If you offer a free trial period, make it real and allow your potential customers to actually try your product or service before making a full commitment to buy it.