Chargebacks are something all businesses try to avoid at all costs. Have too many chargebacks (as little as 1% of the total amount of your sales) and your merchant account might be terminated. That would mean you no longer could accept credit cards and that would hinder any business.
What is a chargeback?
There are a few possibilities for a chargeback but the most common cases are:
1) Customer is unhappy with the product or service they were given.
2) Customer is disputing the charge because it was never authorized (I never bought this!).
3) Clerical- Customer is double billed or billed incorrectly.
4) Insufficient funds.
There are variations of this theme such as the customer does not recognize the name of the biller (which is why you should always try to keep the name on the bill the same as the business type).
In most cases a customer can have up to 120 days (depending on the type of card) to chargeback a transaction and/or they have an issue with the product purchased.
10 tips to avoid chargebacks:
1) Avoid Clerical Errors
Make sure you are careful about the information you are using when billing the customer
Visa has some great tips here
2) Use Your Company Name on the Bill
If the customer does not recognize the name of the company for the charge they are more likely to charge it back due to fraud or unauthorized use.
3) Get a Contract
Basically make sure you have an agreement signed for the product or service you provide.
If they signed off on it, it will be hard for them to dispute it.
4) Dispute it
If you think the chargeback is unfair or fraudulent it may be worth fighting (if you have time) and dispute it as each chargeback has a fee associated with it.
5) Protect yourself against fraud
Many companies won't ship out items if they don't match with the billing address or if the security code is wrong. They might then contact the customer to verify the purchase is legitimate.
6) Don't Wait
If your company is notified about the chargeback it would be best to contact the customer right away and resolve any chargeback disputes.
Be clear about the service or product you are selling! Don't lie or leave out things about your product or service as that is one way to almost guarantee the customer will chargeback.
Make sure you have clear return/refund policies stated on your website or store. This way there are no misunderstandings and you are less likely to have a dispute.
9) Call Me
Make sure the customer knows how to contact you. If your phone number is readily available on the bill the customer is more likely to call first then charge it back.
10) Set the right expectations
If you provide truthful expectations about your service or product you are less likely to have a dispute. A great example: Delivery dates or stock availability.