The net result is that money you thought you had earned as revenues is taken away from you.

It's no surprise therefore that retailers are eager to avoid chargebacks whenever possible. If your chargebacks are higher than you'd like them to be here are a few things you can do to reduce chargebacks.

Before you attempt to reduce chargebacks, be sure you understand how chargebacks happen. Typically, there are two common chargeback scenarios.

In the first chargeback scenario, a stolen credit card is used to purchase your products or services. Inevitably, when the credit card fraud is recognized, the sale will be reversed.

In the second chargeback scenario, the buyer asserts that the seller did not fulfill their obligations. A customer of yours might, for example, protest the sale with an assertion that they never received a product you shipped to them.

Accordingly, to reduce credit card chargebacks you should focus on not accepting stolen credit cards and on delivering the goods you promise your customers you will deliver after accepting customer credit card payments. Finally, you should promptly and effectively refute chargeback claims that you think are not legitimate.

Avoiding Credit Card Fraudsters

Here are a few things you can do to avoid fraudulent credit card transactions.

• Ask for ID - In a bricks-and-mortar retail environment, you can simply ask for identification. If they give you a credit card, ask for a driver's license. Make sure you check that the credit card has not expired.
• Ask for CVC2 and CVV2 Verification Numbers - In an ecommerce purchase, stopping credit card fraud is tougher. Always ask for those little numbers on the back of the credit card. That will stop someone who has a stolen credit card number but doesn't have the actual credit card.
• Use Address Verification - Most e-commerce settings have varying levels of verification. Make sure you enable address verification. If the credit card address doesn't match the given billing address, don't process the order.
• Scrutinize Suspicious Orders - When an order is placed from a free email account, it's more likely to be fraudulent. Similarly, when an order comes from a developing foreign country, there's a higher probability that the transaction is fraudulent. Make sure you flag these orders and verify that they are legitimate before you ship.

Delivering on Your Promises to Customers

How can you prevent an unhappy customer from initiating a chargeback because they feel they didn't get what they paid for?

The secret here should be pretty obvious. Don't give the customers any unpleasant surprises that make them want their money back.

• Use Sturdy Shipping Containers - If an item is damaged when the buyer receives it, they will likely ask for their money back. Take the necessary precautions to ensure that the products you ship arrive intact at the customer's door or receiving dock.
• Be Upfront About Product Features - If you ship a product and the customers don't like it because it isn't what they expected, ask yourself whether you may have miscommunicated. Did you accurately portray product features prior to the sale (e.g. size, etc.) or did you neglect to mention a few features or overpromise? If you provide adequate and accurate information, you will reduce credit card chargebacks.
• Document Your Return Policy - If you have a posted return policy that customers can only return an item within fifteen days of ordering, then a customer can't get away with initiating a chargeback for a return a month after ordering. To eliminate any ambiguities about your return policies, post them in a clear and concise format and make sure your buyers understand them. However, be aware that sometimes credit card terms will override your policies.

It's also a good idea to make it easy for customers to call you. You can customize how your company name appears on customers' credit card statements. Include your phone number and you'll make it easier for customers to reach you if they have questions about a credit card charge. If you don't include the phone number, they might just take the easiest route and contest the credit card charge.

Refuting Chargeback Claims

Credit card companies don't automatically believe the buyers who initiate a chargeback refund. After the buyer files their complaint and starts the chargeback process, you are given time to refute their allegations.

The more evidence you have to refute a chargeback the better.

Let's say a customer says he never received the product you shipped him. You produce a proof of delivery document with the customer's signature on it and use that to refute the bogus claim. Since you have evidence, you'll win the chargeback debate and get to keep your money.

No evidence to refute a chargeback? Kiss the money goodbye.

Keep all of your evidence on order shipment. Some credit card policies allow buyers to file chargebacks weeks or sometimes months after the initial transaction occurs. If you throw out your proof of deliveries to soon, you may be asking for trouble.