Chargeback Prevention: A Strategy
How often have you heard, “Your business is high risk”? But is it truly high risk—or just in need of better optimization and chargeback prevention?
Disputes and operational challenges don’t have to define your business. Small, strategic adjustments can significantly impact your bottom line and refocus your strategies to the goals that inspired you to start in the first place.
Accepting payments is essential for any business, but securing a reliable merchant services provider can be challenging for high-risk merchants. With chargebacks on the rise, proactive prevention is key. By implementing chargeback prevention strategies, high-risk merchants can protect their revenue, maintain strong banking relationships, and ensure uninterrupted payment processing—even as industry standards evolve.Â
Businesses can reduce disputes and strengthen long-term sustainability by following clear, practical steps. The constant threat of account closure can be a thing of the past. Learn how to prevent cancellations and avoid scrambling for a new provider.
Avoid Merchant Account Cancellations
Fulfilling an order only to face a dispute results in lost revenue and additional chargeback fees—an unsustainable approach with no strategic foundation.
A structured risk management strategy involves verifying cardholder details, utilizing address verification, collecting IP and email data, implementing 3D Secure (3DS), and ensuring unauthorized parties cannot redirect shipments. When a dispute arises, leveraging these verification tools provides a strong foundation for defense.
While risk is inherent in business, it should be managed through proactive strategies rather than reactive trial and error. Partnering with Platinum Relations can help you navigate card brand regulations, allowing you to transition your business from a dispute-prone category to one where a greater portion of your earned income remains with you while alleviating concerns about account stability. Some of the main causes of chargebacks are:
Fraudulent Transactions
By leveraging available verification tools, businesses can ensure each authorization accurately confirms the cardholder’s identity, reducing the risk of fraudulent transactions and potential disputes.
Authorized Declines
Declined authorizations and having an issuer flag you as high risk or “suspected fraud” can significantly impact your revenue. Implementing smart authorization practices can help improve your bottom line. It’s not just about increasing the number of accepted authorizations; leveraging reporting tools that offer actionable, reason-code-based data allows for targeted adjustments, leading to more favorable outcomes.
Cancelled Subscriptions
Ensuring that customers can easily cancel a transaction has become a critical issue, prompting the FTC to mandate, effective January 2025, that merchants provide a cancellation process as simple as the initial sign-up. Implementing a cancellation link on each page is the first step in safeguarding your revenue and minimizing dispute fees.
Issuer Collection Problems
Issuers often provide cards without thoroughly assessing the cardholder’s ability to repay. This lack of oversight can result in businesses shouldering the burden of collection issues, especially in card-not-present transactions. When a cardholder defaults on their payment, issuers may target card-not-present transactions within the dispute window. If a chargeback is filed under the premise of non-cardholder participation, you may never be aware that the cardholder did not engage with the transaction. However, you will still be held responsible for proving that the service was rendered, a situation that is increasingly common and detrimental to your business.
How to Implement Effective Chargeback Prevention Strategies
Issuers often provide cards without thoroughly assessing the cardholder’s ability to repay. This lack of oversight can result in businesses shouldering the burden of collection issues, especially in card-not-present transactions. When a cardholder defaults on their payment, issuers may target card-not-present transactions within the dispute window. If a chargeback is filed under the premise of non-cardholder participation, you may never be aware that the cardholder did not engage with the transaction. However, you will still be held responsible for proving that the service was rendered, a situation that is increasingly common and detrimental to your business.
Employ Rapid Dispute Resolution
Rapid dispute resolution (RDR) is a chargeback prevention technique that allows merchants to refund disputed transactions based on preset rules. This pre-dispute resolution strategy improves customer satisfaction, prevents chargebacks, leads to lower dispute ratios, and is an effective plan.
Optimize Billing Descriptors
Another great way to mitigate chargebacks is to optimize billing descriptors with a recognizable business name or website address on credit card statements. Many chargebacks result from customers not remembering what the transaction was or where it originated. Clear descriptors play a pivotal role in chargeback prevention, and using identifiable names is an easy way to reduce disputes.
Have Clear Return/Refund Policies
When return policies are clear and easy to find on websites and receipts, customers are more likely to go through proper refund channels instead of disputing a charge. High-risk merchants can enhance chargeback prevention by clearly defining return/refund policies either online, in-store or on receipts.
Things to Consider When Choosing a Merchant Services Partner
Choosing the right merchant service partner is critical to chargeback prevention and long-term success. From understanding chargeback triggers like credit card fraud and subscription mishaps to having defined procedures that reduce disputes, high-risk merchant account providers can implement strategies that keep your business running smoothly. Here are several things to look for when choosing a merchant services partner.
High Approval Rates for High-Risk Businesses
Choosing a partner with a track record of high approval rates for businesses like yours will help you begin accepting credit card payments quickly. Look for a partner who also offers streamlined onboarding and fraud mitigation solutions.
Proactive Chargeback Resolution Programs
A merchant service provider that utilizes proactive chargeback resolution programs and chargeback remediation processes can help high-risk businesses minimize revenue loss, improve customer satisfaction, and provide easy-to-use tools to resolve disputes more effectively.
Flexible Programs with Limited Hold Options
Banks may require merchant account reserves for high-risk businesses and startups with no payment processing history. These funds can be held for six to twelve months, varying the dollar amount from one acquiring bank to another. Choosing a merchant service provider with flexible limited hold programs can reduce the revenue a merchant must commit to reserves.
Cancellation Process
Appeal Process
Support
Chargeback Assistance
Platinum Relations
Proactive communication
appeal
support
Custom response program that can decrease chargebacks by 80% and increase win rates by 50%. This service is provided at no additional cost.
Provider 1
Termination with or without prior notice
appeal
support
Third-Party Integrations:
Provider 1 offers integrations with services like ChargebackStop and Chargeblast for chargeback management. These require separate enrollment and may incur additional fees.
Provider 2
Termination with or without prior notice
appeal
General online support
Provider 2 offers a basic dispute management process but does not offer specific chargeback protection or assistance.
Provider 2
Termination with or without prior notice
appeal
General online support
Provider 2 offers a basic dispute management process but does not offer specific chargeback protection or assistance.
