If you accept credit and debit cards, it's good business practice to know how to avoid cardholder disputes and set yourself up for success.
Somebody may file a dispute for many reasons including:
- The cardholder doesn't recognize the business name on their statement
- Goods were not been received
- Dissatisfaction with service/goods or product not as described
- Friendly fraud (e.g., the cardholder knowingly approved the transaction but reported it as unauthorized). Friendly fraud is often due to confusion around a statement descriptor on a buyer's statement.
Best Practices for Preventing Disputes
1. Proper Billing Descriptor
You should have a shortened and accurate descriptor. A good statement descriptor should clearly describe the business name your cardholders will recognize.
For example, If your business is "Bob’s Bike Repair LLC", we suggest: "Bob's Bike Repair".
Tips:
- Make the statement descriptor distinct/accurate (e.g., your website domain name)
- Make your Doing Business As (DBA) name as visible as possible on your website. Your legal business name may not be recognizable to cardholders
2. Straightforward Return Policy/FAQ page
Providing customers with an easy-to-follow returns policy that includes "return within" timeframes, refund guidelines, and return shipping instructions can help lower disputes.
We recommend listing this information on the business website or a Frequently Asked Questions (FAQ) page.
3. Clear Description of Product or Service
Merchants should accurately describe their product(s) and service(s) on their website. Descriptions may include product details, specifications, photos, and, if available, customer reviews of the product or service.
4. Provide Current Contact Information/Contact Us Page
Having a company contact page is a valuable tool for deterring disputes. Cardholders want to contact you for issues or questions regarding your product(s) or service(s). An easy-to-access Contact Page can be a first-line defense against an incoming dispute from a cardholder. We recommend publishing business hours and available phone support (e.g., Monday - Friday, 6 AM PT to 6 PM PT).
5. Good Communication with Your Customers / Be Available, Respond Quickly
If a cardholder has initiated a credit card charge inquiry, it sometimes can be resolved before it becomes a chargeback. If the customer contacts your business, you could resolve the disagreement and prevent a formal chargeback (returned funds to the cardholder).
Making contact and discussing the issue may resolve a dispute immediately. For example, a cardholder might initiate a dispute if the cardholder receives a damaged product. Giving the cardholder an opportunity to present their situation might result in you replacing the item rather than the cardholder opening up a dispute. Every situation is unique, so allowing for good communication is key.
Be available to the cardholder. If a cardholder sends an email, ensure an auto-reply confirmation is emailed back to the cardholder. An auto-reply demonstrates acknowledgment of a cardholder's email and questions. Other forms of communication could be through live chat or by providing a customer service number. Being available and responding minimizes the lag time and miscommunication between your business and the cardholder.
6. Keep Detailed Records of All Transactions
It's important to retain purchase information to handle a possible dispute. Documentation requirements will vary among credit card issuers and are based on the type of transaction (e.g., card-present or card-not-present).
For example, with online transactions, merchants can take screenshots of order confirmations, shipping details, delivery confirmations, anything that provides proof of the purchase, or services rendered. The merchant can submit different documentation for card-present transactions, including their written return guidelines, shipping policies, and transaction receipts showing the cardholder's signature. For card-present transactions, submitting more evidence than necessary may be beneficial.
7. Order Confirmation and Follow-Up
When a customer places an order, it is essential to send an automated order confirmation to alert them that their order has been successfully processed. Once the order is shipped, forward the shipping information or confirmation of digital delivery to the customer. In case of any shipping delays, keep the customer updated and informed. For instance, if the ordered product is out of stock, let the customer know immediately and provide options such as whether the order will be shipped when it's back in stock, or provide a refund.