In 2010, any company that receives a substantial number of credit card orders faces a grave threat: chargebacks. For those unaware, a chargeback is when a customer reverses an order they made from you and then gets their money back. Originally, chargebacks were created to protect consumers from unscrupulous merchants. Rather than endlessly arguing about unauthorized charges, customers could simply initiate the chargeback and be done with it.
Unfortunately, the ease of initiating a chargeback has created a class of unscrupulous consumers. Increasingly, consumers who have not been wronged in any demonstrable way are using chargebacks heedlessly. Other chargebacks arise from innocent clerical errors. All chargebacks, no matter the source, have the potential to wreak havoc on the cash flow of card-accepting businesses. Below, we’ll explore several ways that companies can protect themselves from chargebacks.
Know Each “Reason Code”
While chargebacks are designed to be easy and automatic for consumers, they cannot simply be executed without reason. Rather, there are four separate “reason codes”, one of which customers must state to their credit card issuer and which they, in turn, are required to provide the merchant.
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