Episode 6: How to Handle Chargebacks

Episode Transcript Hello, welcome to The Business of eCommerce. I'm your host, Charles Palleschi. This is Episode 6. On today's episode, we're going to talk about how to handle chargebacks. With chargebacks, it's a bit more of an advanced concept, but it's something that if you've been in business for a while running your own eCommerce site, you're almost guaranteed to have got a chargeback. No one likes it. It's awful when it happens. And if you're in business, it either has already happened and it happened many times to you or it's a matter of time before it does happen. So it's something that everyone should be aware of and kind of know some methods of dealing with. So first off, what is a chargeback? A chargeback is when you as a eCommerce retailer, or any retailer, are selling, charging a credit card, the end user then once they get that bill, they go back and they dispute that charge. Nothing comes back to you as the retailer. A bank puts a hold on the money that has been exchanged already and you then, are then ... the onus is on you as the retailer to basically say either "Yes, this is valid" or fight it and try to get that money back. But at that point, the money's already essentially gone. So, simple example. Someone comes on your site. Pays with their credit card, a $100 charge. They, let's just say they don't get the product for whatever reason, and instead of contacting you, or, you know, if there are any normal channels, that sort of thing, they just call up their credit card company and say I have not yet got my product. I want to do a chargeback. I want to dispute this charge. The credit card company then takes that $100, immediately gives it back to the consumer, then they contact ... I believe it's Merchant Gateway, it kind of goes through the system. Then essentially you get a letter, usually a written letter saying: There has been a chargeback on so and so charge. There has been a $100 hold put on your account plus an additional chargeback fee. Do you want to provide evidence to the contrary, basically saying do you want to dispute this chargeback now and then go back and forth with them? So, unfortunately, you as the retailer, I don't have exact statistic, but more often than not no matter what you provide, there's a good chance you could lose that battle. They very, very, very often side with the end consumer. And the retailer basically just has to, you know, eat the loss essentially ... Which is really rough when you're a retailer and you've actually shipped them the product. So not only are you out the refund charge, the actual amount, but you're also out the product though. So you lose both. So it's something if there's anyway to avoid this, it is very advantageous for you as a retailer to try not to get chargebacks or to get as few as possible. The first tip, and real easy ... everyone should be doing it anyway is just have a really clear refund policy. It's something that even in your terms of service you should have it on every page right in the footer. The very first thing should be a Refund Policy. I would maybe even say put a separate refund policy link with just a refund policy every single page. Also provide it at Checkout. Just make it very clear what's gonna happen, how, how many days. Don't have any sort of gray areas, any sort of thing that could lead the buyer not to understand exactly what's gonna happen and how. You know, it should be right there in the face. Just make it very clear if you want to say: All refunds in 7 days. No refunds. It's up to you. But you have to make it very clear just so the buyer knows: Hey, if I buy this, this is exactly the terms that I'm buying this under. That right there alone drastically does reduce the amount of chargebacks due to some sort of dispute where maybe they had it for 90 days and they try to return the product, and then you come back and say, "Sorry you can't." It helps out.