Need an opinion on this...
I have a small website - my husband and I sell hand-crafted clothing we buy in Central America. We have been slammed this past year with folks buying our stuff and then filing a chargeback. They keep our stuff and get their money back. We provide proof of shipping, clothing is as described. It is nice stuff. We dont sell junk. We dont sell outside the US. We follow all the rules... anyway, I am wondering around looking for something to ease our chargeback losses - ran into this site and read an article about chargebacks. Obviously it was promoting their chargeback protection service. But is it really true? Am I just supposed to tighten my belt and take these hits. They are saying you should expect losses of 1-3%... is that true? Because we are averaging closer to 5% - is that too much? What can we do to cut our losses? All help or thoughts or ideas are appreciated.
Are you sure the chargebacks are coming from fraudsters (i.e., people who were intent on disputing the credit card charge before they even placed an order)? Or could it be the result of some other factor?
Do you offer proactive customer service - liberal returns policy, followup after the sale, a clear and unambiguous order policy? Does the charge that appears on the credit card bill clearly identify your business, or does it have the name of some third-party credit card processor? Have you tried contacting the customers who initiate chargeback to see why they've done it and seek some alternative resolution?
Maybe it's particular to my client base, but I've never had a single fradulent order or chargeback out of many thousands of orders. If a customer calls and is unhappy for whatever reason, I tell them to send the order back and I'll refund their money, simple as that. We offer free shipping on all orders, so on top of the credit card processing charges for both the original sale and the return, I'm also eating the cost of shipping. But I'd rather send the customer away feeling like they were treated well than to have them dispute a credit card charge.
I'm not sure what a "chargeback protection" service would get you - other than a less-full wallet when you pay for it. There's plenty you can do yourself to prevent or otherwise nullify chargebacks; you shouldn't need to pay for a "service" that deals with it for you. Plus, they won't offer the service to you for long if they're not making money from you.
Yes - we have all the measures in place you have mentioned and more. Congratulations on your perfect no chargeback record. Wish we had the same.
I know what you mean about the "less full wallet" concept. But the premise seems reasonable. At least our buyers would feel the heat these people are offering. Regardless...
I also looked at the thread on PayPalSucks about this issue. I am not alone in being ripped-off, that is for sure. And this whole thing of having to accept credit cards with PayPal is getting me very nervous...
[edited by: lorax at 7:24 pm (utc) on Feb. 22, 2005]
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So the whole problem is with purchases through PayPal?
For PayPal payments, if you've followed all the rules for coverage under their Seller Protection Policy, you shouldn't have any issues with chargebacks. The PayPal policy is on this page: https://www.paypal.com/us/cgi-bin/webscr?cmd=p/gen/protections
[edited by: lorax at 1:31 pm (utc) on Feb. 23, 2005]
Everything you say is contrary to everything we have read and our own personal experience.
Yes we do have a merchant account. Regardless, some people prefer PayPal. We have much lower percentage of chargebacks on PayPal - because we had turned-off the direct credit card feature. Now, with this change in PayPal, we can most likely expect our chargeback rates to double - and that is not an appetizing prospect.
Yes, we do follow the PayPal recommendations. But that has nothing to do with chargebacks as they are completely apart from anything PayPal has control over.
This sort of chargeback abuse is well known and well documented with online merchants.
[edited by: lorax at 1:41 pm (utc) on Feb. 23, 2005]
I feel for you Jessica_B! any chargeback is way too painful. But we too have had no chargebacks through either our Merchant Account or Paypal during the last two years.
We scrutinize all orders and turn down anything that raises the hair on our necks. AVS and CVV validation helps to get the neck hairs active. We often call our clients when we are suspicious
We used to get chargebacks when the information labelled on our client's credit card statements didn't match our corporate name but have since fixed it.
We used to have a similar issue. We found by sending a certified letter written by our attorney demanding payment or return of the product, most customers sent the payment. A lot are now good customers who pay promptly. (go figure...)
What is the chargeback code (2-digit #) that they are using as a reason?
Welcome to WebmasterWorld, Jessica_B. To cut chargebacks, I'd recommend starting by characterizing the nature of the causes.
For many companies, fraud is the #1 cause of chargebacks, i.e., a stolen card number is used to send merchandise to an address where the stuff can be retrieved by the fraudster. If this is the case, fraud reduction can be accomplished by beefing up verification steps.
Companies with confusing or generic names can have problems. On just about every credit card statement I get, I have at least one line item that I'm hard pressed to remember. Only one of these turned out to be bogus in the last few years; the rest were real purchases for which the name on the statement wasn't enough to jog my memory. I took the time to figure these out and didn't initiate chargebacks on them, but some people will chargeback first and ask questions later. If this is the problem, adjusting the company name or even including a toll-free number are a good idea. I just saw another really good idea - I purchased something online, got the product, a clean transaction all around. And then, a week later, I got an email that said, "Just a reminder.. you'll be getting your credit card statement soon, and it will have a charge for $___ for your widget purchase; the company name shown will be We-Charge-You, Inc." Cost them nothing, and I'm sure reduces phone calls, confusion, and chargebacks. Brilliant.
You are already avoiding overseas shipment - a good idea if you are trying to avoid chargebacks. While some companies can make money shipping worldwide, others find it difficult due to fraud, delivery delays and customs issues, theft during the delivery process, etc. I've found a higher percentage of chargebacks on overseas orders is almost unavoidable.
Another reason for chargebacks is customer service - do you have a friendly and easy return policy? When I was in a high volume mail order business, we put full return instructions and a return shipping label right on the printed pick ticket in the package. If a customer can't figure out how to return merchandise they don't want, or if it seems like a hassle, they are more likely to charge you back.
Another way to cut chargebacks is to be sure you process credits promptly. Process your returns quickly, and be sure to credit the customer's account immediately if you realize that they aren't going to get the shipment, e.g., the carrier acknowledges they lost the merchandise. Personally, I'm sympathetic to merchants and will cut some slack when I return an item; lots of people, though, will get their bill and immediately charge back an item they returned (even if they returned it only a day or two earlier). If your credit gets posted first, though, the chargeback won't be applied.
The final step is to win as many as possible of the chargebacks that you do get. Be sure your documentation is tight and that all policies are clearly stated. I've won plenty when I could prove that the customer ordered the item, that it was delivered, and that the customer had no reason to charge us back per our terms and conditions. (E.g., they didn't return the item.) It's a pain once it gets this far, but it's worth the effort.
Thanks everyone. You know, we are doing everything that everyone is mentioning here. But...
Seems to me like we need to go a bit further. Currently we are looking at three protection possibilities: PerchSYS, ChargeFront, and ChargeBackBureau - anyone have any recommendations?
If you only sell to US merchants, consider also re-writing your TOS, charging for a legitimate chargeback (i.e. I never received it when you know they did, etc). And then sell your chargeback to a company. It won't help too much with the ratio - but people tend to think twice about it.
Are you shipping all packages so they require a signature of the recipient to verify receipt?
Are you validating that the person that bought the product even lives at the specified address?
Almost as bad as shipping overseas, are you shipping to a different address than the billing?
Let me tell you what one enterprising fellow did....
At one point he was insuring all of his packages via UPS but they only cover loss DURING shipping, not after the package is dropped at the door. Most of all the complaints happened long UPS was gone, and all the money on package insurance was a complete waste.
HOWEVER, he continued charging the customers shipping as if the insurance amount was included and placed all that money in ESCROW for his chargeback/shipping damage fund, basically self-insuring with each customer purchase. It all balanced out in the end for him, maybe it would work for you.
According to my merchant banking suppliers when I questioned them on this subject they said:
When taking payment by credit card the only real protection you have is the honesty of the cardholder
I never get chargebacks but I believe it is part and parcel of selling mail order now and has to be priced in if you are in a high risk sector.
Afterall if you had a B&M store you would be plagued by shoplifters
|Yes, we do follow the PayPal recommendations. But that has nothing to do with chargebacks as they are completely apart from anything PayPal has control over. |
Are your chargebacks related to fraud, non-receipt of goods, or are your customers claiming the items purchased are "not as described"? If you follow the requirements for the Seller Protection Policy for your PayPal orders, you are protected on chargebacks for fraud and non-receipt.
|We have much lower percentage of chargebacks on PayPal - because we had turned-off the direct credit card feature. Now, with this change in PayPal, we can most likely expect our chargeback rates to double - and that is not an appetizing prospect. |
Do you mean the change to the Profile setting that allowed you to block credit card payments when the account holder has a bank account? That would not have stopped a PayPal user who only had a credit card from purchasing from you, and I would guess that Verified PayPal users would be a lower risk for you in general, even if they do pay with their credit cards. How many Buyer Complaints did you receive while you had that setting on? If your Verified buyers aren't trying to get their money back now, why do you think they will once they're allowed to pay by credit card?
Start with this article: The Chargeback Challenge (http://www.sitepoint.com/article/chargeback-challenge). It's an unbiased article on how to prevent chargebacks.
Whenever you receive a chargeback you are told what the customer is disputing. Is there a pattern to the reasons for your chargebacks? Are they all claiming fraud? Or that they didn't receive it? Or that it wasn't what they expected? If there is a common reason for your chargebacks you know what needs to be addressed.
As for chargeback prevention tools you should look into Verified by Visa and SecureCode by MasterCard. Cardinal Commerce are the experts in this and can help you out immensely.
[edited by: lorax at 4:43 am (utc) on Feb. 27, 2005]
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Really appreciate the feedback all of you have provided.
The reality is - we already knew all that was provided. These are simply people that are ripping us off. After Sam and I went over all our options, we decided to try Chargefront. Actually, while we are surfing around, looking for chargeback insurance programs we came across a Chargefront ad that was offering FREE membership. So, we have nothing to lose and everything to gain.
Sam and I were both impressed with the Chargefront member area. Looks like a good deal to us. How can it not be when it is free. Besides, think these Chargefront people know how to handle our specific issues.
Jessica_B if possible please let us know how Chargefront works out for you.
Our first and only chargeback occurred back in November (a time when we were hungry for orders), and since then we have been much more suspicious of any order over average order size of flagged by WorldPay with a caution.
Our main defence is very detailed logging - from the order we can look at the click path of the visitor.
Looking at the order that was charged back the visitor added items seemingly at random to the basket then checked out. Nothing was removed from the basket, practically every product clicked on was added to the basket, and no photos zoomed in (many of our items are clothing - who buys clothes without looking at the zoomed photo?) There was also no pattern to the size/colour of the items ordered.
We have since then rejected 3 orders that looked suspicious. Each time we emailed a 'query' to the customer and had no response, so rejected the orders.