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Comprehensive Chargeback Management Guide - Part 4

Part 4: Preventing Chargebacks with Good Business Practices

Now that you have learned all the basics on chargebacks in parts 1, 2 and 3, it is now time to get down to business. The next three parts of this blog series will discuss the important tasks of preventing and disputing chargebacks. While many people believe that preventing chargebacks is all about security codes and PCI protocol, honest and transparent business practices are the biggest part of preventing chargebacks. This post will focus on these best practices. Implementing these suggestions should not only lead to less chargebacks, but more satisfied customers as well.

Customer Service

Good customer service can be a great first line of defense against chargebacks, as a customer will often reach out to customer service first. Your customer service phone numbers and email addresses should be prominently displayed on your website, invoice, and in any user manuals that accompany your product. Once a customer reaches out, it is vital that you are responsive and helpful. It is always a good idea to send an automatic reply to emails that let your customer know that you have received their request. Customer Service Representatives should be properly trained to handle billing disputes, as they generally require dealing with more frustrated customers. You do not want to aggravate customers and send them to their bank out of spite or anger. It is often enough to explain what the charge they are questioning is, in order to jog their memory. Having solid customer service will help ensure that when a customer has a billing issue, they come to you first.


There are many things that can go wrong in the shipping process, all of which carry the risk that your customer will initiate a chargeback. It is also one of the easiest parts of the transaction flow to get away with a fraudulent chargeback. However, several practices can help prevent this from happening. The first is to utilize shipment tracking. This has become so common that it seems odd when purchases do not have it. While tracking shipments is a good first step, to really prevent chargebacks you will need to go above and beyond. Requiring a signature for packages over a certain dollar amount is a surefire way to eliminate items not received chargebacks, but can be seen as inconvenient to the customer. Setting the threshold for signature on delivery is a balance that your business will need to resolve. Another shipping policy that you might want to consider is disallowing package re-routing. It is a common tactic of fraudsters to reroute packages in order to throw people off their trail until it is too late and the package has already been delivered. Shipping is another area where honesty is important, especially with arrival estimates. If a customer hasn’t received an item and it is several days after you said it would arrive, it is likely they will initiate a chargeback.

Return Policy

Having a simple and properly presented return policy is another key area of transparency that can help prevent chargebacks. Your business’ return policy should be presented to the customer clearly at the time of purchase, and not hidden among four pages of “legalese”. It is also important that your return policy not be restrictive. Having a return policy that makes it difficult to initiate and process a return, or involves a very short window, will lead to many chargebacks, no matter how up front you are about it. It may seem counter-intuitive to allow for such easy returns, but chargeback fees and other consequences add up a lot faster than the minor costs of processing returns. Finally, it is advised to avoid restocking fees, if possible, as they incentivize customers to initiate a chargeback to avoid having to pay.

Subscription Service Transparency

It is no secret that many subscription service providers use purposefully deceptive practices to trick consumers into signing up (and paying) for their service. Another common subscription service practice is to make it very hard to cancel the service after a free trial, or simply hope customers forget to cancel. While this can be a lucrative business model, it can lead to many chargebacks when angry and confused customers see their credit card statement. Below are some subscription service best practices to help avoid chargebacks:

  • Clear and concise Terms of Service
  • Publish all subscription rates (not just the introductory rate)
  • Well-defined and simple cancellation policy
  • Transparency about auto-renewing subscriptions
  • Avoid free trials all together - A common alternative is to do specials that bundle a free month with the purchase of multiple months (i.e. Get one month free when you pay for three months up front)

Payment/Billing Descriptor

A payment or billing descriptor is how your organization appears on customers’ bank and credit card statements. Your descriptor should feature both your business name, as well as a phone number that customers can call with questions about their transaction. Your organization should have a payment descriptor that is both accurate and easily identifies your organization. For example, if your business name is “Jimmy’s Cleaning Service” your payment descriptor should be something like “JIMMY’S CLEANING 1-800-JIM-CLNS” and not something vague like “JCS LLC.” Also, avoid using your parent company name to describe all your businesses if possible. This may require setting up multiple merchant accounts, or putting multiple business names in your payment descriptor. These steps will prevent chargebacks that result from customers not recognizing your business name on their bank/credit card statement.

Get It in Writing

It may seem unnecessary to execute a written contract to accompany the purchase of your business’ services, but it can significantly increase your chances of winning a chargeback dispute related to product/services not delivered. Having clear and concise Terms of Service is important, but customers can make the claim that they weren’t required to read it or didn’t understand it. A signed contract can be your best defense respond to these chargebacks. While this suggestion doesn’t necessarily apply to retailers, it can be very helpful to subscription and service based businesses.

Use a Chargeback Prevention Service

A suggestion for large organizations who deal with multiple chargebacks is to consider signing up for a chargeback prevention service. These services offer a holistic approach to chargeback management. This includes helping prevent chargebacks, collecting relevant information to support fighting them, real-time reporting to assist in quick response, and re-presentment assistance to increase your chances of winning claims. There are many reputable chargeback prevention service providers, such as Chargebacks 911, Chargeback Gurus, and Although these services are not for everyone, if you operate a high-risk business and are having trouble keeping up with your chargebacks, it is definitely something you may wish to research.

Chargeback prevention requires a two-pronged approach. This post focused on business practices that help prevent customer-related chargebacks. The next post will change gears and focus on preventing fraud-related chargebacks through solid security policies.