Merchant Account Payment Gatways
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How to Prevent or Reduce Chargebacks
For any company that does business on the internet one of the most important concerns is securing payments. After all, if you don’t get paid, you can’t keep the doors open, even if they’re virtual doors. This means establishing a merchant service account. These accounts ensure that businesses will have their credit card payment processed in a fast and efficient manner.
There’s only one problem. These companies, or merchant service providers, receive a commission for each and every transaction they process. The rate of these commissions are based on several factors, most importantly it depends on the riskiness of the industry the company competes in; and this risk is determined almost entirely by something called a chargeback.
What is a chargeback? Basically, it is a fee that the service provider is hit with when one of your customers disputes a charge you made to his credit card. After a dispute has been filed, the credit card company will contact the service provider, since they are responsible for processing payments, and they will often demand restitution. Once they have been repaid, they will slap a chargeback fee on the provider, which is designed to compensate the credit card company for the time they spent recouping funds. This fee will then be passed on to you. And since these charges sink many new businesses, it is important to know how to prevent or reduce chargebacks .
One of the most reliable ways to instantly reduce the number of chargebacks is to make sure that you verify the CVC2 and CVV2 numbers on the back of each and every credit card. These are the 3-degit security codes that are present on most cards. According to industry reports, this single safeguard can cut chargebacks by more than a quarter.
It is also important to install some kind of Address Verification System (AVS). As you might expect, this is to ensure that the address on the order form matches the cardholder’s billing address. Most high-traffic merchant website utilise these systems and they will often reject payments if records do not match. Why? Well, if the shipping address and the billing address don’t coincide, there’s an awfully good chance that the card is stolen or at least borrowed, often from a parent or guardian.