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What can you do to prevent and manage Payback Disputes, Chargebacks, or Payment Disputs

Jan 17, 2023

In some cases, when you operate an online business it is possible to make a sale and then receive a demand notice. This usually happens weeks sometimes even months later the first transaction. You'll have administrative issues to do and the possibility of losing revenue from the sale, and less time to focus on managing your company.

While this is usually not a frequent occurrence however, if this happens on a regular basis significant partners such as companies that deal with credit cards could begin to levy fines, impose tighter regulations, or even end ties with your company.

It's good to know the proactive approach to avoid disputes and handle them when they do occur keeps your shop free from headaches. Even better news? There is everything you need to know in this article.

Table of Contents

What are chargebacks or disputes?

The payment dispute can happen when a person who uses the credit card company they use to contest a charge that was incurred on their account. The credit card company takes these concerns seriously, and in the event that they find that the motive for the dispute is valid the company will issue a temporary credit to the account of the customer while the dispute is resolved. This is also known as charging back.

Why do chargebacks and disputes happen?

There are two main causes of payment disputes:

  1. Dissatisfied customers
  2. Fraudulent card activity

We'll dive deeper into both a bit later.

From the first look, you would think you'd be more in control of this one than the other. However, the truth is that you have some control over both, as you'll see.

Why merchants need to address dispute

Payday debts aren't something you can just ignore and hope they go off. They aren't going to go away. If you ignore them, it will result in problems that escalate and could affect the viability of your business.

Card networks track your dispute rate (the ratio of confirmed transactions in comparison to those that are disputed) and can charge you higher costs or penalize you if yours is unfavorable.

What to do when you receive a payment dispute

Here's what to do when you get a dispute with your payment Notice of a payment dispute:

Respond immediately

If the card network starts with an inquiry it is imperative to respond promptly. If you're using Pays, you'll be notified of any disputes via mail and also an email notification on your dashboard.

In the absence of a response in an extremely short period of time makes them assume that you aren't planning to dispute the issue. Each card network has their specific timeframes for when an inquiry into a dispute remains open. However, you'll need take care to gather the right evidence when making sure you submit the evidence prior to when the timeframe runs out.

If you're using Payments it is easy to sign into your store's dashboard to respond to the complaint.

dispute response in Payments

Provide documentation

In the next step, give proof that is clear and convincing about the particular transaction. This should include the number of your credit card (or the truncated version) along with the date, amount and date of the transaction, and any details of the purchase or proof of delivery that you keep on file.

This will allow them to eliminate the possibility of fraud, as well as ensure that everyone is on an understanding of the circumstances.

Submit requested evidence

Along with the standard document, the credit card company might ask for more information concerning the transaction. Even if they do not, you should send the required documentation anyway. The time spent gathering the necessary documentation will be well-spent, but make sure you've gathered and submitted everything by the time the deadline is.

The kind of proof the evidence you submit will vary based on the kind of payment issue you're dealing with. There are at minimum seven different types of dispute over payment:

  1. It wasn't processed.
  2. Multiple charges
  3. Fraudulent charges
  4. Charges that are not recognized
  5. Product not received
  6. Product unacceptable
  7. Subscription canceled

What happens if you fail to respond to charges?

The concept of chargebacks may seem daunting or complicated to handle. However, it's an important aspect of managing a business and following some simple steps could save you from a lot of stress. The credit card industry still wants you to be successful while protecting their users so you must follow the guidelines to keep a solid reputation.

If you decide to completely avoid chargebacks, things can become difficult. This is the sequence of unchecked or unchecked chargebacks:

First, you lose the profit and the revenue from the sale, and you must take a charge on top of that loss.

If your disputes start to accumulate and you don't manage them the card company may impose fines or higher fees until you bring your chargeback rates down. If you continue to have issues then you could be barred in accessing a portion of your revenue from sales. Finally, they can eventually stop allowing payments, and mark your account as high risk.

This might stop other card networks from wanting to do business with your company. If you aren't able to accept transactions online, you won't be able to effectively run your business.

It's true that this is not a typical situation. It's totally preventable if you follow the correct actions.

What is a threshold of dispute?

The threshold for dispute, also known as the the threshold for chargeback is the threshold that credit network card companies use to assist them decide when to increase monitoring and penalties on a merchant or business so that they can reduce their rate of dispute.

What is the rate of dispute?

The 'dispute rate' measures the number of disputes for all transactions processed in a given time period for example, a week. For example, if there were 500 transactions processed during a week and five of them were disputed, you would have one percent disputation rate for the week.

This differs from "dispute activity', which is the percentage of disputes that occur in a given time period regardless of date of processing.

There is a difference in that dispute resolution is not awaited until weeks or months after purchase. This is what dispute activity encompasses. You might get five disputes within a week, however if three of those relate to purchases earlier in the week, your rate of disputes would comprise two disputes from that week, but your activity in dispute would be all five. Here is more from Stripe on measuring the number of disputes.

chart of dispute activity

Credit card networks usually use dispute activity for their levels of dispute. And again, each card company will have its own specific threshold. The threshold can be determined calculated based on disputes activity, dispute volume, or more commonly it could be both.

As an example, Visa will increase their penalty against businesses that have at least 100 chargebacks in one month, and 0.9% disputes. But Mastercard's dispute threshold begins at 1.5%.

The number of payments is beneficial for small businesses, because if you only receive fifty payments during a month and only one is disputed, you're already at a 2% rate. This means that the threshold for volume keeps small businesses from being subject to greater penalties.

If you're using the Payments platform and have questions about how to best handle issues, it's always possible to contact the customer Customer Support Team for help.

How can I lower my online store's dispute rate?

Once you know how disputes are made Here are some ways that can help you lower the number of disputes you have to resolve.

1. Use a clear bank statement descriptor

An explicit statement description informs your customers of the place they purchased the item. It could immediately reduce the risk of disputes arising from unrecognized fees. They'll see your information and remember that, yes, it's a legitimate purchase they intended to purchase.

descriptor statement examples

And if a customer finds this charge on their account and wonders about the charge the customer can call your number directly, rather than filing a dispute to their credit card company, and you may be able to resolve the matter with them.

2. Add company details on transaction receipts

For the same reason as the bank's descriptor, providing customers easy-to-read and accurate company information on their receipt increases the chance that they'll call you in the event of a concern and not the credit business.

Include the name of your business address, phone number, physical address including logo, website address as well as a note about customer service. Make sure that this does not interfere with the transaction details that appear on your receipt.

3. Resolve customer complaints quickly and look for solutions

Be aware that there are at most seven possible causes for chargebacks. Several can be resolved before reaching the dispute stage simply by offering good customer support.

When a client complains about a product, its condition, damages in the delivery process, or any other aspects, listen to them and collaborate with them to solve the problem and avoid charging back.

4. Make contact prior to fulfilling any suspicious orders

It's among the greatest tools you can use to fight fraud. Being a smart business proprietor, you need to check your order in the event of any sign of risk or fraud.

If you don't receive a answer, even after multiple attempts, or if your telephone number is invalid, consider refunding the order without shipping it.

Most other payment processors offer an element of fraud-detection metric, but they're not necessarily as user-friendly. With Payments, it's right at the bottom of every transaction. There's no need to sit on hold for your credit card company for half the day.

5. Get the proof of delivery

Whenever possible, this is an excellent piece of proof that you could use when a client claims that the order never arrived. Some examples include tracking shipment information, the requirement for the delivery person to sign for it or taking a photograph of the final delivered item or item, etc...

6. It is imperative to clearly state the policy

Your policy regarding refunds, returns, and cancellations are important to your customers. Include them on your invoices or receipts. Feature them on key website pageslike the checkout page. Put them on display in stores. Even better, to get the cardholder to sign or acknowledge the fact that they accept the terms of your offer.

7. Use accurate product descriptions

Product descriptions need to match the actual product. If a customer receives a product which isn't the product they were expecting, they may contest the charge because they'll assume that you shipped them the incorrect product.

The details matter. Don't skimp.

8. Get rid of items that are discontinued or no longer available.

Take items off your online store that are no longer available so customers can't order an item they'll never receive. Consider doing the same thing for items that are not in stock, provided you can easily and accurately include an 'out of stock' icon on the relevant product pages, and keep up with changing the status as it alters.

out of stock settings in

9. Be wary of international purchases

Certain kinds of frauds are an unfortunate reality in this day and age, and orders from some locations could pose more chance of being a victim. It helps to choose the payment method that incorporates the ability to detect fraud in order to reduce the risk of fraud, for instance payment processing.

10. Collect as much customer information as possible

Not every business needs to gather shipping details However, you should collect it nonetheless. It helps confirm that a credit card holder is the person they say they are.

In every purchase, you will need the following information:

  • Customer name
  • Customer email
  • CVC number that appears on their credit card
  • The full billing address as well as the postcode
  • Delivery address, if differs from the billing address

11. Provide tracking details for the shipment

It is important to be prompt when you do This. After a customer orders and receives the email with tracker details as soon as is possible. After that, they should get periodic notifications. This serves as more evidence if a customer claims it never came.

Strengthen your defenses against fraudulent charges

Want to improve your detection of risky transactions? That's just one benefit from using Payments. It assists online businesses to accept payments, preserve their reputation, and maximize profits.