Posted by tina on Sep 06, 2016

 

Direct Response Companies & Chargebacks

Dealing with credit cards in the US is a bittersweet experience for most direct response companies. US shoppers are very likely to pay by credit card and accepting card payments is critical to the success of your business. On the other hand, there’s the risk of credit card chargebacks.

If you run a direct response marketing company, you’ve probably experienced this yourself . A certain proportion of your sales are likely to result in credit card chargebacks and it’s a loss that can catch you off-guard.

Visa and Mastercard set their chargeback thresholds at 1% throughout the US, but the rates could reach as high as 2.5% in some cities.  Furthermore, the Federal Reserve Bank of Kansas City found that 70 to 80 percent of these chargebacks are resolved as “merchant liability.”

Chargebacks can affect merchants in all industries.  Overall, merchants lose about $16 billion a year due to chargebacks. But the rates are higher for direct response businesses which is why many direct response companies are labeled high risk merchants. A high risk classification makes it more challenging to get access to a merchant account.

What can you do?

Some providers are still willing to take on high risk merchants and these providers can offer you access to a secure merchant account. These merchant accounts can help you reduce the rate of credit card chargebacks. They’ve been designed with added security that can detect fraud.

The account management tools provided should help you manage your clients, deal with disputes, handle returns and avoid chargebacks.

However, no business can get rid of chargebacks entirely, so here’s a few more tips on what you can do:

  • Communicate: Stay in touch with your clients. The quicker your response, the more likely they are to tell you what the problem is before they file a chargeback request with their issuing bank. Always keep your communication lines open and speak to your clients on the phone, via email or even text. Keep them updated about delivery and chase up the order after a week or so.
  • Build a Relationship: Earning trust is essential if you want to keep your customers satisfied. Build a relationship and make sure you solve problems for them wherever possible.
  • Go The Extra Mile: Deliver quickly so that the customer doesn’t have too much time to change their mind about the purchase. Go the extra mile and keep in touch. Make sure you provide world class customer services online and over the phone, and clarify all the terms and conditions on your marketing material.

All this will go a long way towards preventing credit card chargebacks.

Conclusion

Credit cards are convenient, but the rates of chargebacks are remarkably high for the direct response marketing industry.

  • Work with a high risk merchant provider who can help you control chargebacks.
  • Communicate with your clients and go the extra mile to decrease chargeback risk.
  • Use chargeback early warning systems to prevent chargebacks before they occur.
  • Dispute chargebacks that you have a good chance of winning.
  • Enable fraud fighting tools in your payment processing gateway

When you keep your chargebacks under control, you mitigate your risk and protect your payment processing accounts.  

How is your direct marketing company controlling charge-backs?  

Contact us today.