Creek Financial Services » Chargebacks

Notify customers about possible delays, and keep them happy.

Neil Moncrief — Wed, 27 May 2009 01:08:09 +0000

I have a client who sells boats online- lots and lots of boats. He has drop-shipping arrangements with all his suppliers, so he maintains almost no inventory. Typically, his customers must wait at least 6 weeks for their boat AFTER they’ve paid for it. In fact, most of the boats he sells haven’t even been built at the time he sells them. Yet his chargeback rate is extremely low. How does he do it?

Generally speaking, credit card processors discourage merchants from billing customers before the merchandise has been delivered, or at least shipped. The reason is simple: Customers don’t like to see charges on their credit card statements for items they haven’t received. That leads to chargebacks and a high rate of chargeback losses.

So how does this client of mine manage to keep his chargebacks so low? And why does he win nearly every chargeback that is filed? He makes sure his customers understand his prepayment policy, and he has them agree to it in writing. He also goes to great lengths to stay in touch with his customers while they’re waiting. He calls to update them while their boats are in the factory, and he calls them again before shipping. Customers who have been informed of likely delays don’t get mad when delays occur. And happy customers don’t file chargebacks.

I’m happy to provide this information free of charge. If you found it helpful, please subscribe to my RSS feed so you’ll be notified of future posts. You can also follow me on Twitter, where I regularly post short tips. I promise to never spam you or pressure you. Please forward this to your friends in business, and feel free to rate my post or leave a comment so I’ll know how to improve. Thanks!

Make sure your customers remember your name!

Neil Moncrief — Wed, 06 May 2009 00:45:35 +0000

Will your customers remember your business name? Will they recognize it when their credit card statement arrives? If these seem like odd questions, consider how today’s consumers and businesses operate:

Brick-and-mortar businesses may have one legal name, but operate under one or more DBA names.
E-commmerce businesses may be known by their dot.com addresses, but not by their legal or DBA names.
Consumers are using credit/debit cards for more and more routine purchases, so they may have trouble recalling specific transactions.
Consumers can shop at trade shows, county fairs, etc., which may be far from a merchant’s physical business location. Those customers may never see a sign or banner displaying the business’s name.
Many consumers routinely discard receipts before their statements arrive.
Husbands and wives may not know about each other’s purchases, so the one who opens the statement may be caught off guard.

In today’s fast-paced world of plastic and e-commerce, your customers may or may not remember buying from you. And if they don’t recognize your charge on their statement, they are likely to call their credit card company and initiate a chargeback. If you’re a business owner, you already know that chargebacks cost you both time and money. But did you realize you can reduce chargebacks just by helping your customers remember your name?

If your business’s DBA name differs from its legal name, tell your customers what to expect on their statements. A simple counter-top sign and a note on your receipts will work wonders. If you sell online, place a notice on your checkout page and all e-mailed receipts. And make sure your credit card processor submits your business’s phone number to the card issuing banks so it will appear on your customer’s statements. Simply providing a phone number could be the difference in a satisfied customers and an expensive chargeback.

If chargebacks aren’t a concern for your business, consider yourself fortunate. But if you need help getting your chargebacks under control, please give me a call.

Why you should always use AVS for protection

Neil Moncrief — Tue, 21 Apr 2009 09:35:23 +0000

If you own or manage an e-commerce business, and you’re not using the Address Verification Service (AVS) to help validate orders, you’re increasing your exposure to chargebacks. Like most security measures, AVS is not perfect. For instance, it only works with participating banks, which limits its effectiveness overseas. But, at the very least, it can be used to separate your customers into two broad groups: those who are almost certain to be legitimate and those you should give a second look.

Take a few minutes to read this article I posted at the Bank of America forum for small business owners. The article describes the risks you take if you either fail to use AVS on your commercial website or you choose to ignore the warnings received from AVS. This is the true story of how my own Internet business, 2BigFeet.com, ignored the signs and lost a lot of money. If you’ve never heard of AVS, or you’re just not using it now, take a look. Hopefully, it’ll help you avoid the hard lesson we learned.

And one last thing… there is no cost to credit card processors for AVS. In fact, your credit card processor should offer it for free and encourage you to use it. After all, reducing chargebacks benefits both processors and merchants. If your processor is padding their profits by charging an AVS fee, whose interests are they protecting?

Long live the knucklebuster!

Neil Moncrief — Tue, 31 Mar 2009 18:03:00 +0000

Are you old enough to remember knucklebusters? If not, let me explain. Before credit card terminals made instant authorizations possible, merchants used imprinters to make physical imprints of credit cards showing the amount and date of the sale, along with the store’s name and address. The customer would sign the copy, thereby proving the card had been physically present in the store.

The term “knucklebuster” referred to what could happen if a store employee wasn’t careful. Sliding the mechanism from side to side not only imprinted the raised card numbers onto the carbon paper receipt, it was loud and potentially dangerous. But the result was worth the risk, and may still be today. With the raised numbers of the credit card physically imprinted onto the receipt, the cardholder couldn’t dispute that the card had been physically present in that particular store.

Today, imprinters have gone the way of the dinosaur. Modern credit card terminals read the magnetic strip on the back of cards, and that serves as undisputable proof (in the eyes of Visa/MasterCard/Discover) that a card was used at a particular location. But we all know that magnetic strips can lose their magnetism over time. When that happens, you (the merchant) simply hand-key the credit card information into the terminal. But what if the customer denies having ever been in your store? What then? Without proof, you will lose the chargeback every single time! Yes, you read that right. You will lose every chargeback, unless you have a knucklebuster to use as backup. And in case you’re wondering, no, a photocopy of a credit card is not just as good as a physical impression.

It may seem like overkill, but a physical imprint of a credit card can mean the different between losing a chargeback and winning it. And if the charge was a large dollar amount (let’s say you sold a set of dining room furniture or a new riding lawnmower), the knucklebuster will be worth its weight in cash!

Whenever I sign up new retail merchants, I always remind them to use their imprinter as backup for all hand-keyed transactions. Orion Payment Systems, the processor I represent, sends every new merchant a customized imprinter name plate. And if a merchant doesn’t have an imprinter, I can provide one for just a few dollars. Did your current processor take the time to warn you about this topic? If not, why?

If you’re happy with the service you’re currently getting from your credit card processor, that’s great! But if your processor isn’t living up to your expectations, I’d appreciate the opportunity to show you what you’ve been missing. Feel free to give me a call.