How to Prevent eCommerce Chargebacks

May 25, 2022
| by Rebecca Fox

Shopify eCommerce merchants can prevent chargebacks by implementing a return policy to change chargebacks into refunds. Learn strategies for avoiding chargebacks in your Shopify store.

A chargeback is a payment refund that occurs when your customer disputes a credit card transaction via their credit card company or bank instead of contacting you directly for a refund. Dealing with chargebacks can be a difficult and time-consuming process that can greatly impact your profit and reputation. 

Chargebacks often occur due to a lack of communication between the customer and the merchant. While chargebacks should be used as a last resort, some customers jump to initiate a chargeback when it’s not clear to them how they can get a refund from the merchant. Having a clear, accessible, and well-implemented returns and shipping policy can help minimize chargebacks.

When do eCommerce chargebacks occur and how can they be prevented?

We will answer these and more questions, and provide tips and strategies to reduce avoidable chargebacks.

Why do chargebacks happen?

Before diving into ways to prevent chargebacks, let’s take a look at the top reasons customers initiate a chargeback.

  • 30% – Chargebacks resulting from transactions made with a stolen card.
  • 26% – Chargebacks resulting from undelivered orders.
  • 15% – Chargebacks initiated due to retailers shipping the wrong product.
  • 8% – Chargebacks resulting from orders not as described.

Learn more about Shopify Chargebacks and How To Fight Them.

As you can see, there are many reasons customers might want a chargeback. By implementing a few best practices you can turn those chargebacks into refunds, or avoid them altogether and improve customer satisfaction.

3 Most Common Chargeback Reasons 

1. Poor Product Descriptions

If the products purchased are not what was advertised, your customers may complain to their credit card company, which could result in a chargeback being issued. This is called friendly fraud and is an example of a situation that could be avoided by directly issuing a refund or product exchange.

Solutions:

Write accurate and detailed product descriptions

Make sure your product descriptions are clear and accurately describe the item. Adding photos and reviews to the product page can reassure customers that the product fits their needs.

Make returns and refunds easy

Display your returns policy clearly on your website, so your customers can be confident that if they are unhappy with their purchase, they can return it instead of initiating a chargeback. Not sure how to write a detailed return policy? Check out our guide on how to create a clear returns policy.

2. Wrong Product Shipped/Undelivered Orders

This chargeback reason occurs when the item your customer ordered never arrived, arrived damaged, or the wrong product was shipped. This can happen due to merchant errors, defective packaging, or delivery mistakes.

Solutions:

Have a clear shipping policy 

Merchants that do not have a well-drafted shipping and order fulfillment policy are susceptible to this kind of eCommerce chargeback. Let your customers know how long shipping will take, and make sure you request confirmation upon delivery. Avoid these common shipping mistakes to make sure your shipping process is streamlined and efficient.

Avoid miscommunications 

Provide your customers with shipping and tracking information, send updates throughout the shipping process, and be available to answer any questions they may have. 

3. Fraudulent Transactions

Fraud is the number one reason for chargebacks. Customers can claim a chargeback in instances where a charge was made on their credit card without their authorization. Stolen credit cards are the most common form of fraud in this case.

Solutions:

Verify your customers’ information

Use 2-factor authentication, require proof of delivery, and keep records of all transaction information.

Use a chargeback mitigation tool

Instead of having to handle inevitable chargebacks yourself, you can choose to automate the chargeback mitigation process with an app such as Chargeflow, that manages eCommerce disputes and chargebacks for you.

Conclusion

Having clear product descriptions, constant communication with your customers, and clear refund and return policies will help you minimize chargebacks in your Shopify store.

Make things simple for yourself – put your customized returns policy in place using ReturnGO so your customers won’t think of chargebacks as an option, then automate the chargeback mitigation process with Chargeflow so you won’t have to handle chargebacks yourself. 

Chargebacks are a difficult part of eCommerce, but that doesn’t mean you have to take it lying down. By knowing what steps you can take, you can reduce your online store’s unnecessary chargebacks.

Automate Returns & Exchanges

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