Chargebacks: What Mompreneurs Need to Know

Whether you are a blogger, online merchant, freelancer, or other type of entrepreneur, you have plenty on your plate without having to worry about external sources tying up your finances.Even if you haven’t dealt with chargebacks, you're vulnerable to them as a business owner. Knowing how to prevent chargebacks from happening can save you a lot of unnecessary hassle.

Chargebacks: A Brief Introduction

Put simply, a chargeback is a credit card refund. It was designed to protect consumers from the responsibility of paying for fraudulent charges. Chargebacks also eliminate the expense of paying for services or goods not rendered.The process begins when the consumer contacts their bank to dispute a claim, after which the bank issues a provisional refund. The refund is withdrawn from the merchant’s account.That means you could go to bed one night with your bank accounts in perfectly respectable standing, only to wake up in the morning and find your funds depleted.You have only a limited amount of time to dispute the chargeback. If you are successful, you will pay only the internal handling fees. If you're unsuccessful, you will have to pay the refund along with a fine. No fun! :(If you get too many chargebacks the bank may terminate your account. Then you won’t be able to process credit card transactions. And how is your business supposed to survive without credit card payments?!

An Ounce of Prevention…

When used properly, chargebacks are a valid form of consumer protection. But as an entrepreneur, they mean that you—and your business—may suffer.Disputing these financial nightmares is time consuming, expensive, and frustrating. The entire chargeback process is extremely detailed, and disputing these financial nightmares is time consuming, expensive and frustrating. If your energies are constantly tied up in the red tape of the chargeback process, you won’t be able to grow your business and your overall productivity will suffer.Therefore, it is essential to prevent them from happening in the first place.No measures toward prevention are 100% guaranteed. However, with the proper attention to detail, you can certainly save your business from the unnecessary profit loss of frequent chargebacks.Though the tips below are geared toward 3 specific subsets of entrepreneurs, they are applicable for startups of all kinds.

What Mompreneurs Need to Know: Tips for Avoiding Chargebacks

Freelancers

1. Before accepting a job, investigate your potential employer.Insist on at least one phone call, especially if you got the job online. If the business has an actual building in your area, stop by during office hours to introduce yourself and feel the place out. Check out the company's website and see if there are any reviews filed with the Ripoff Report or the Better Business Bureau. If the website seems shoddy, Ripoff Report is rife with bad reviews, or you cannot seem to talk to an actual person, move along. The company is probably a scam.2. Get a contract in writing that outlines the services you will deliver, as well as deadlines and compensation.Make sure both parties sign on the dotted line. Getting it notarized is ideal. Do not do business with anyone who refuses to sign a contract.3. Follow the contract to the letter.Delivering low-quality work, something other than what was asked for, or missing deadlines could be viable reasons for an employer to file a chargeback.4. Familiarize yourself with common scams and the patterns of fraud.Being savvy about fraud could save you a lot of headache in the future. Read up on scams facing your industry so you don't fall prey. If you're a freelance blogger, check out Writer Beware.5. Remember that what you produce is still yours under copyright law until you are adequately compensated for it.Thus, if an employer files a chargeback against you but still uses your content, then the employer is in violation of copyright laws.

E-commerce Saleswomen

1. Provide superior customer service.This means you should…

• Avoid selling low-grade products
• Provide accurate and detailed product descriptions. Include all the information the shopper could possibly want—size, shape, color, materials used, etc. Include images of the product, taken from different angles and zoomed in on details.
• Make the return process easy to understand and as thorough as possible.
• Ensure your contact information is readily accessible. Sometimes, customers find it easier to file a chargeback than navigate the return process or contact the merchant; make sure that isn’t the case for you and your customers.
• Answer the phone when it rings. Send automated responses to all emails so customers know you’ve received their message. Then, genuinely address the customers concerns in a timely fashion.

2. Charge a customer's card only after the product is shipped.This is particularly true for backordered products. If a customer has to wait a long period of time to receive their order after they paid for it, they are more likely to file a chargeback. They’ll think it hasn’t been delivered within a reasonable time frame.3. Use the fraud-prevention tools provided by your merchant processor to keep scammers away.Some of these tools include blacklists, whitelists, and setting maximum limits per transaction.4. Save all documents regarding your business in an organized fashion.This includes any written communication with your customers, delivery confirmations, receipts, and so on. If a chargeback is filed against you, these documents are often the only proof you have that will enable you to get your money back.

Bloggers

1. Carefully consider the best way to accept payment for each of your services.As a blogger, you will probably receive funds for things like advertisements, sponsorships and eBook purchases. These product types may not be best accommodated by the traditional payment processors. Check out Bitcoin, which allows you to bypass chargebacks altogether.2. If you sell any sort of digital goods on your blog, consider the following precautions:

• Require a digital signature
• Put the activation code for products in the cloud (this will help ensure delivery)

3. Choose your payment processor carefully.PayPal is one of the most popular processors on the internet. However, as a merchant, you should be aware that PayPal regularly places holds on new accounts. The company is also notoriously difficult to fight if a chargeback does arise.Before choosing your processor, explore some of the less common alternatives, some of which may be able to better accommodate high-volume, low-price-point sales or lower volume sales for businesses just starting out. Weigh the pros and cons and proceed accordingly.Everyone knows that chargebacks are stressful, expensive, and time consuming. But they are not the end of the world. As long as you pay attention and follow these simple tips, most of the stress can be avoided. Don’t let chargebacks deter you from pursuing entrepreneurial bliss!

Have you experienced a chargeback? Tell us how it affected your business and what steps you’ve taken to manage these financial nightmares better.