A large portion of your revenue will likely come from credit card sales. It's a part of the growth of just about every business you can think of. It's because of how significant it is that it's an understandable concern that business owners have about potentially getting a chargeback fee. Nonetheless, the more knowledge you have, the better you'll be able to handle it. Here's what you should know about chargeback fees and how to avoid them.

What's a chargeback?

When a cardholder disputes a credit card charge and desires to nullify the sales of a transaction, a chargeback occurs. Different scenarios may lead to a chargeback happening. One example is a person who may have had their card stolen, and it was used for a spending spree. The card-issuing bank likely notified the owner, and the owner requested that all of the fraudulent transactions be canceled. Another scenario a chargeback can happen is through friendly fraud. Friendly fraud is when a customer forgets they purchased an item that they're later not happy with, or don't know how to return to the store. A customer can also request a chargeback if they don't recognize the business name on their card statement. Lastly, sometimes, the business owner can be at fault. It's important that you're careful not to enter the incorrect purchase information or charge a customer twice for one item. 

What's a chargeback fee?

After a customer's card issuing bank processes the chargeback request, the business owner is usually given a fee by the bank. The bank has to use its funds to repay the owner of the card. As a result of having to repay the card owner, they seek to make up for that loss by seeking the funds from your account. There's a high likelihood you'll get a chargeback fee if the customer's purchase was a result of an error in how you processed the payment. Your payment processor will likely have you research the chargeback issue. It's probable that you'll get the purchase amount returned to your account if it's determined that the payment error wasn't your fault. Nonetheless, you may have to deal with a fee related to doing the research.

How do you lower your risk of chargeback fees?

While chargeback fees may inevitably happen sometimes, you can reduce the risk of them occurring. One preventative measure is to confirm the cardholder's identity. You can request a photo ID or ask for card verification codes. For magnetic stripe card transactions, get the customer's signature. Another measure you can utilize is to make your billing details clear. On credit card receipts, avoid using a DBA or parent company's name that your customer won't recognize and potentially cancel the transaction. For all transactions, use the exact store or website name. Lastly, make sure your return policy is clear and visible in your store and on your website, so the customer can return the item, rather than seek a chargeback if they're unable to return it.

A chargeback fee is something that every business owner wishes to avoid. While it's unfortunately unavoidable, knowing this information on chargeback fees will help you make them less likely. If you don't have a merchant account, it would be good to get one, as they can sometimes be helpful with chargebacks. You can read this article on How to Get a Merchant Account in 10 Steps.