In the interest of protecting customers, banks have made it easier than ever to file a chargeback dispute against a business. On a customer’s word, the bank will initiate a process that, in effect, puts the burden of proof on the seller. When a business loses a chargeback dispute, in addition to losing the product or service, the business is also responsible for chargeback fees, which can be hundreds of dollars.

In some cases, the chargeback dispute process has resulted in what is known as friendly fraud, a practice that costs retailers an estimated $11.8 billion each year. With friendly fraud, a customer purchases an item, disputes the charge, and receives a refund while still keeping the product.

Whether friendly fraud or legitimate, a chargeback can damage a company’s reputation, take money from its bottom line, and cause stress and anguish. Here are a few things a business can do on the front end to prevent chargebacks.

Be Honest

Every business wants to show its products in the best light possible. This often includes photos that may mislead a customer into believing an item looks different than it actually does. Even unwittingly, a business may eliminate details about an item that would inform a shopper’s decision. These omissions can easily lead a customer to feel deceived, prompting a chargeback.

Use the Right Name

One of the most important steps a business can take in reducing chargebacks is simply ensuring that its name appears properly on a customer’s billing statement. When a customer looks at his statement, the name of the business associated with the transaction should clearly identify a business. By knowing up front the name of the establishment, the customer is less likely to initiate a dispute due to a misunderstanding.

Create a Clear Return Policy

Even if a company’s return policy is posted on its website or printed on the back of a receipt, that information can easily be missed. When a customer wants to return an item and is denied, that customer then turns to his credit card company for retribution. By stating that policy at checkout, either in-store at the register or on the checkout confirmation page, a company can take steps to reduce unpleasant surprises after the purchase.

Respond to Customer Cancellation Requests

Another way to help reduce chargebacks is to make sure all customer cancellation requests are handled efficiently. Once processed, a customer should be notified by email that the cancellation is complete. This can not only help alleviate misunderstandings, but it will also serve as written confirmation in the event the customer disputes the date a cancellation was requested and processed.

Chargebacks are expensive and time-consuming for business owners, but with a few precautions, professionals can steer clear of them, while still providing good customer service. For best results, businesses should check the terms of their own processing service for tips more specific to their particular processing solution.

Photo Credit: Stavos, Flickr