12 Ways to Prevent Chargebacks on Your Ecommerce Store

Chargebacks are, unfortunately, an unavoidable aspect of running an online store. Chargebacks911 estimates that by 2023, the average cost per chargeback is expected to be around $191—a worrying stat for small- to medium-sized business owners who don’t necessarily have the bandwidth to deal with them.

While combating chargebacks can be difficult, there are a few things that ecommerce business owners can do to decrease the likelihood of having chargebacks filed against them in the first place. Below, we offer actionable steps online businesses can take to be proactive and vigilant with their orders to reduce the likelihood of chargebacks.

Be Proactive With Presentation & Service

The more merchants convey what customers can expect from the product and the process of receiving it, the less likely they will be dissatisfied with what they receive—or the amount of time it takes. Here are some ways businesses can be proactive in preventing chargebacks:

1. Depict products honestly and in great detail

Make sure each product is described exactly as it will arrive. Upload clear images and write descriptions that include important information like dimensions, compatibilities/incompatibilities, weight, color, and more. The more accurate the presentation of your product online, the less likely customers will feel like what they received was not as described.

2. Make sure the return/refund policy is easy to find before the order

If customers are aware of rules and processes before placing an order, they’ll be more comfortable purchasing in the first place. Then, if they wish to return the product for any reason, they’ll know they have a clear path toward getting reimbursed and will (likely) try that method before involving a bank.

3. Provide exceptional customer service

Make sure contact information is easy to find. If a customer can talk to a live person and explain their issue, they may be willing to reach a compromise before they resort to a chargeback. If the customer is asking for an exception to clearly-stated refund policies, pay attention to their demeanor—sometimes it’s worth issuing a refund anyway to avoid the headache of a chargeback later.

4. Don’t charge until the items have shipped

Additionally, send follow-up emails for every step of the order. Keeping customers informed of the status of their order is an easy way to instill confidence that their product is on the way and has not been forgotten. Customers are less likely to dispute a transaction for non-receipt of goods if they can see exactly where their order is and aren’t charged too soon for it.

5. Keep track of returns and issue refunds promptly

One major concern for customers is returning a product to an online store, but never receiving their money back—thus losing out on both the product and their money. Alleviate this fear by keeping customers informed throughout the return process, and make these transactions a priority on your end to ensure customers get their money back as soon as possible.

6. List adjusted price and shipping times clearly for international orders

While international orders are a great way to grow a business, they are riskier. If a customer’s local currency is not displayed, they may get confused about the amount they are paying and file a chargeback when the amount on their bill does not match. Clearly list the business location, local currency, and export/shipping restrictions to avoid this.

Vigilantly Monitor Orders for Unusual Activity

Being vigilant can be much trickier than being proactive. Successfully vigilant businesses monitor their orders for activities that are often associated with chargebacks. Many payment processors have become quite clever at detecting fraud, but businesses can incorporate an extra layer of protection by making sure each purchase seems legitimate before fulfilling an order. Here are a few ways businesses can vigilantly monitor orders for fraudulent activity:

1. See if the location of the IP address matches the address on the order IP

If the order is not from a known customer, you should check the location of the IP address on the order via a free third party service like NordVPN. If no location is brought up, the individual could be using an open proxy or an anonymous proxy to place the order. Additionally, if the area code of the phone number doesn't match the one associated with the IP, you may want to take a second look.

2. Inspect the domain name and email address

If you're not familiar with the domain in the user's given email address, you should attempt to navigate to it. If the domain doesn't resolve to an actual site, then you can also look it up on WHO.IS to see when it was registered, if it is currently active, and the contact info on the registration. If the address looks to be in a first name/last name format, you can also check to see if it matches the name on order and the card on file.

3. Double-check addresses

Is the billing address on the suspicious order the same as the shipping address? if they aren't the same, what's the distance between the billing and shipping address? And does the billing address city/state match the general location of the IP address? If anything looks fishy, you may have a fraudulent order on your hands.

4. Look for multiple accounts

If the order seems fishy, take a look at your system and see if the email address pops up anywhere else. Does the customer account information correlate to any already-existing accounts? If so, you may want to take a look at the order and at any other accounts the customer may have.

5. Monitor your billing system for issues

Sometimes even the best billing systems can glitch or experience outages, so make sure you’re on top of any issues your payment provider may be experiencing. The faster you can identify an accidental double-charge, issue a refund, and inform the customer, the less likely they will be to try to fix the issue through their bank.

6. Keep an eye out for unusual activity

Sometimes, simply the nature of the order itself can indicate that it is a likely instance of fraud. Look out for any orders with unusual attributes, such as:

  • Shoppers placing large orders without preference for size, color, make, or model of goods/services
  • Unusually high transaction amounts
  • Existing shoppers who suddenly order a substantial volume of goods/services
  • Single customers that provide more than one card to cover an order or set of orders
  • Shoppers that order more than once in a given day
  • Multiple transaction attempts with a failure at the first attempt

These can be legitimate transactions, but they can also be fraudulent. Being on the lookout for this behavior, as well as having additional safeguards in place like address verification (AVS), asking for CVC codes, and adding velocity controls can help prevent chargebacks.

Final Thoughts

Hindsight is 20/20, and you may not always be able to prevent chargebacks from occurring on your store. However, by being proactive and vigilant, ecommerce businesses can lessen the likelihood of having to deal with chargebacks on a regular basis and focus on growth instead.