Introduction
Chargebacks are one of the biggest hidden costs in payment processing. When a customer disputes a transaction, you not only lose the sale, but you also pay a fee ranging from $20 to $50. If you get too many chargebacks, your processor may even suspend or terminate your account.
1. The True Cost of Chargebacks
- Loss of the original sale amount.
- Chargeback processing fee ($20-$50 per case).
- Higher fees if your chargeback ratio increases.
2. Common Reasons for Chargebacks
- Customers don’t recognize the transaction on their statement.
- They didn’t receive the product or service as expected.
- Fraudulent disputes (friendly fraud).
3. How to Reduce Chargebacks
- Use clear billing descriptors so customers recognize charges.
- Require signature confirmation for high-ticket orders.
- Offer responsive customer service to resolve issues before disputes happen.