Prevent and manage chargebacks with SumUp

What is a chargeback? Simply put, it’s a refund resulting from a payment dispute. But unlike a regular refund, customers don’t have to return whatever they bought, since they’re appealing to the bank directly. 

As a business owner, you lose money whenever this happens, which is why it’s important to know how to prevent chargebacks. First, you need to understand what causes them. 

Chargeback causes

There are a number of common reasons credit card chargebacks happen, both fraudulent and non-fraudulent.

Fraudulent chargebacks

When a customer sees they’ve been charged for something they never bought, that usually indicates fraud. This can lead to them disputing the charge and you paying the price. 

Non-fraudulent chargebacks

The reasons for fraudulent chargebacks are pretty simple, but there are lots of reasons a customer may initiate a chargeback that have nothing to do with fraud. Some typical ones include:

• Shipping problems. If a customer never got their order because of a problem with the shipping, they might file a chargeback. 

• Technical problems or a website error. If your website malfunctions or the customer does something by accident, it could result in an accidental purchase. 

• Delays in the return process. Sometimes, a customer returns an item and expects a refund, but it hasn’t shown up in their account for some reason. That can lead to them disputing the original purchase. 

• An unclear business name. If a customer buys something from you and the charge they see is under another name, they may think it was fraud and dispute the charge. 

• General dissatisfaction. Customers may decide that they aren’t happy with the quality of your product or your customer service, and initiate a chargeback as a retaliation. The challenging thing here is that ‘quality of service’ is very subjective, so it can be hard to argue as a merchant. 

Preventing chargebacks

Now that you understand some of the reasons you might be facing a chargeback, the question is how to prevent chargebacks. First, let’s tackle non-fraudulent credit card chargebacks. 

Preventing non–fraudulent chargebacks

Non-fraudulent chargebacks are easier to address than fraudulent ones, because they’re fundamentally an issue of misunderstandings or hiccups in your business. 

Chargebacks due to shipping problems indicate an error made by your shipping carrier. Talk to them and figure out what, if anything, they’re doing wrong that leads to broken or missing products. It’s also a good idea to send customers emails tracking the status of their order. 

Chargebacks involving technical problems or user error usually stem from problems with your website. You want to make sure your ecommerce store is reliable and crash-proof. User error may mean that customers are confused by some aspect of your website. Try to minimise the information you’re asking for or throwing at them, and make checkout as clear as possible. 

Looking for an ecommerce platform? Our Online Store builder is free and easy to set up in minutes. 

Make sure to clarify your return policy so that customers don’t get impatient after they return items and initiate a credit card chargeback before their money has reached them. And make sure that the name on customers’ bank statements matches the name of your business to minimise confusion. 

Finally, be sure to accurately describe your product, and respond to customer queries promptly to make chargebacks on the basis of dissatisfaction less likely. 

Preventing fraudulent chargebacks

Fraud protection is a bit more challenging, because the cause of the chargeback is intentional. Still, there are ways to make fraud less likely. Implementing stricter verification measures helps ensure that the credit or debit card being used belongs to the consumer and hasn’t been stolen. Require details like the CVC and the customer’s address so you can check that it’s a genuine purchase. 

2-factor authentication, where a customer is required to verify their purchase on a second device, is also a good fraud protection measure. That way, credit card chargebacks are less likely because anyone looking to use stolen information to make a purchase has to have a customer’s phone or email password as well. 

When it comes to physical deliveries, requiring a signature cuts down on fraud. Having someone come to the door to sign for a package lets you check that the customer and the recipient are the same person. 

If a customer has ordered from you before, you might be able to flag orders that don’t look right. People ordering massive amounts of something or ordering something inconsistent with past behaviour can be cause for alarm. 

Managing chargebacks

Despite all your preparations, it may happen that you’ll be faced with a chargeback at some point, so it’s good to know how to handle the chargeback dispute process. To start with, chargebacks are contestable . As a business owner, you can sometimes get a chargeback refund if you plead your case successfully. 

How SumUp handles chargebacks

At SumUp, we do everything we can to make the chargeback dispute process as painless as possible. First of all, we cover the initial cost of the chargeback as soon as our acquiring bank notifies us of one. If you do wind up paying, the money will come from your next scheduled payout rather than your account. 

We’ll send an email informing you there’s been a chargeback and giving you a deadline for disputing it. Until that date, you can contact the issuing bank to try and get a chargeback refund. If you don’t respond in time, the cardholder will keep the money. 

The bank decides whether to overturn the chargeback or not based on the information you give them. So make sure to be as detailed as possible in your email – this is also why things like regular shipping updates and requesting signatures upon delivery are good ideas, so you can prove your case. 

The bank either rules against you, in which case the cardholder keeps their money, or in favour of you. If they agree to refund your money, the chargeback gets reversed. The cardholder gets another 60 days to appeal their case, after which we return your money. 

Regardless of the outcome, because we don’t immediately withdraw your money when a chargeback is filed, and deduct the amount from future payouts, you won’t lose as much as you might with other payment providers. 

Want to feel more secure when you get paid? Join SumUp and you’ll have a payment provider who’s always on your side. Plus, all transactions made with a SumUp card reader are encrypted according to the most current data protection standards, which means a lower chance of fraud. And better fraud protection means fewer credit card chargebacks.