By and large the most important risk in an online business processing credit cards is the chargeback. It is the reversal of the payment made by the customer back to his account. A claim for a chargeback may arise in situations where the product delivered is faulty or the product is not as promised, or there has been processing errors. But by far, the most important factor in this is the case of fraudulent transaction which takes place usually with stolen cards.

The threats:

The threats posed by a chargeback are very few but are very influential in ruining your business. A chargeback on the first hand can skyrocket your operating costs since these are fees which are generally not taken into account in the normal proceedings of a business. Since operating costs increase day by day, your gross margin also decreases. You business thus suffers a huge setback with these chargebacks as you need to pay hefty amounts for them. The maximum risk posed by these chargebacks is the termination of your merchant account. Credit card processing companies generally don’t want to do business with merchants who have high risk businesses or are very prone to chargebacks as they also suffer losses.

Some easy to follow steps:

I am not going into the technicalities on how you should avoid chargebacks. I am just going to put forward some easy to follow steps to avoid the growing number of chargeback for your business. Here are a few of them:

• Follow a flexible return policy in case your customers are not satisfied with your product or service. It will discourage the customers from going to the issuing bank for a chargeback claim. They would like to settle the matter with you before going for such heavy legal procedures. Maintaining good customer relations and appointing a proper customer care executive generally solves these problems.

• Although, it is very foolish not to keep your online store open at night, yet be sure to scrutinize the late night transactions with care. Validation and verification of late night orders should be done very carefully as fraudulent transactions in an online business are more likely to take place late night.
• Remember, in any kind of business, be it online or offline the transaction is not completed as soon as the payment is received and the product is delivered. Proper maintenance of products and ensuring the proper delivery is also essential. In an online business with a merchant account one can use a follow-up email to ensure that the customer has received the product in good condition and that he is satisfied with the product.

• A credit limit is a very good option as fraudulent transactions from stolen credit cards are generally made in bulk. Hence setting a credit limit for a particular credit card may solve the problem. Once this limit is reached, it is suggested that you do an independent verification and call the customer personally.

• Finally, take note of the credit card and the billing information of a customer who has claimed a chargeback more than once. It helps you save recurring chargeback.

To be smart in dealing with chargebacks, you should understand and know how to tackle and overwhelm them. Remember, if you frequently happen to get huge chargebacks, your account might get suspended and even at times, you’ll be denied for merchant account service access. Beware that you are not frequently chargeback, since you can give a halt to all those queers and risks. If you are one among the merchant, who strives to control chargeback, then better adhere the defined precautions and control the chargeback shot.