5 Mistakes Merchants Make When Disputing Chargebacks

E-commerce merchants have long looked at chargebacks as an inevitable and an unfortunate cost of
doing business online. But just because chargebacks are time-consuming to fight — and can be
challenging to win — doesn’t mean merchants shouldn’t dispute chargebacks.

One reason it’s hard to successfully defend against chargebacks is the cumbersome process. Banks, credit card companies and payment platforms each have their own timeframes, procedures and documentation requirements. If merchants aren’t paying attention, it’s easy to make simple but costly mistakes.

Here are five of the most common mistakes merchants make when it comes to disputing chargebacks and tips for not making the same mistake twice.

1. They Can’t Find Their Documentation

Each online sale a merchant makes involves copious amounts of paperwork — including purchase receipts, shipping and delivery confirmations, and customer correspondence. Merchants may find it hard to keep it all organized so that it is easy to find everything needed to quickly respond to a chargeback. But the failure to have an organized system in place can make it virtually impossible for merchants to promptly, accurately and completely submit the compelling documentation that can help them win chargeback disputes.

How to Avoid Making This Mistake

Merchants should take the time today to establish an easy-to-use organizational and storage system for transaction documentation. While there may be some upfront costs associated with starting such a system, they’re certain to be less than the operational costs associated with trying to find unfiled documentation each time a merchant has to respond to a chargeback.

2. They Don’t Respond in Time

While some customers have up to six years to file a chargeback, most customers have at least 120 days from the date of purchase to dispute a transaction. Unfortunately, merchants have a far shorter timeframe for responding. Visa gives merchants just 30 days to respond to a chargeback; MasterCard offers 45. In contrast, PayPal gives merchants only 10 days to submit evidence to counter a PayPal dispute.

And what happens if a merchant doesn’t respond promptly? It used to be that failure to respond meant an automatic assumption of acceptance of the chargeback by the merchants. But with the new Visa Claims Resolution initiative, merchants may now face additional fines if they don’t submit a response to Visa that formally accepts or denies the charge.

How to Avoid Making This Mistake

Merchants should make sure they know exactly how much time each payment platform gives them to respond to chargebacks and then send their response promptly. And if there’s the risk of paying an additional penalty if they fail to respond, merchants need to know that, too.

3. They Bury Their Refund, Return and Exchange Policies

Merchants who make it hard — if not impossible — for customers to find and understand refund, return and exchange policies may find their chargeback levels end up rising. And when merchants try to defend themselves during representment, they have to point to their obscure, unclear policies. It’s not exactly a recipe for success.

How to Avoid Making This Mistake

Merchants must make their policies clear and easy to find, and they should also be prepared to be flexible when it comes to resolving customer dissatisfaction. After all, it’s better for the e-commerce merchant and their business overall to refund a customer’s transaction than to risk fighting a chargeback.

4. They Don’t Understand Reason Codes

It’s easy for merchants to think that all chargebacks are created equal and can be responded to in the same way. But there are dozens of chargeback reason codes that explain exactly why a customer filed a chargeback and what steps a merchant must follow (and what compelling evidence they must submit) to increase their chances of a successful representment.

Credit card issuers also frequently modify their reason codes — Visa just streamlined their 22 reasons into four categories in April 2018 — which means merchants need to keep up. If they don’t, they risk significantly reducing their chances of representment success.

How to Avoid Making This Mistake

Merchants must keep up to date with changing reason codes and ensure they’re familiar with the compelling evidence required to support each one of them.

5. They Aren’t Investing in Fraud Prevention

Some merchants believe their fraud and chargeback rates aren’t high enough to warrant a dedicated fraud prevention team — and that can be a costly mistake. Each $1 of fraud currently costs merchants more than $2.90 for time, fees and penalties, physical goods, and shipping costs — and that figure doesn’t even consider damage to chargeback ratios, merchant accounts and reputation.

How to Avoid Making This Mistake

E-commerce merchants should consider partnering with fraud prevention solutions like ClearSale to protect against both fraud attacks and rising chargeback levels. ClearSale’s 100% chargeback guarantee gives merchants the peace of mind that if ClearSale ever approves a transaction that turns out to be fraudulent and results in a chargeback, ClearSale will pay the entire amount of the chargeback.

Interested in learning more about how our unique approach is helping 2,500 e-commerce merchants? Contact one of our analysts today. They’ll be happy to share more about our chargeback protection and how it can help your business grow.Is every valid order being approved