This transcript was generated from the episode audio and may contain minor errors.
[Music]
Seeing your business grow is an exciting milestone. But what happens when you've got increased sales and visibility and more chargebacks? We're gonna hear from a listener today who's getting too many chargebacks. Chargebacks is basically when a consumer complains to their bank or credit card company. They're like, "Hey, I don't recognize this charge." Or, "I don't agree with this charge." Then the bank or credit card company will usually reverse it, at least temporarily do an investigation, send you the merchant an inquiry that you have to then respond to.
And it's just kind of a pain and hassle all around. You also tend to get charged for chargebacks even when you win them. So that's a fun fact or not so fun fact. So basically, if you are selling anything online, you want to avoid chargebacks, let's see what we can do to help this listener. Anybody else who's selling anything online, chargebacks are frustrating.
Let's see if we can minimize them. The detailed question in my answer coming up in just 30 seconds. [Music]
Hey, Chris, I've been running an e-commerce side hustle for a while now, and it's starting to grow. That's great, but I'm also getting more and more chargebacks where customers don't even realize that the charge is actually coming from my business. And then they call their bank to complain.
I'm also a little worried about the potential for fraudulent charges and the impact they might have on my business. So my question is, what steps can I take to prevent or minimize the chargebacks? They're super annoying and also feel discouraging. I'd rather see money coming into my business instead of going out of it. [Music]
All right, so dealing with chargebacks, it is an unfortunate reality of selling things online or being a small business of any kind.
Basically, if you accept credit cards, eventually you're going to have to deal with a chargeback. But there are definitely some steps you can take to prevent and minimize the impact. So let's get into it. All right, number one, clearly identify your business on billing statements. Sometimes chargebacks come about because people are like going through their bill and they see a business name that they don't know what it is or they don't recognize the charge.
And so they just kind of get trigger happy and they're like, "Oh, I didn't buy that. "This is a scam, it's fraud." So make sure that a business name that connects to the product they purchased is what appears on their credit card statement. And that's just a setting that you adjust in your Stripe account or another dashboard whenever you set up your merchant account, whatever it is. You can also include a customer service phone number or email address. If you don't want to take phone calls, I understand that.
I don't like getting phone calls either. But just some means of contact that will help them reach out with questions to you before initiating a chargeback so that can prevent it. Also, you want to have a clear and fair return policy. So sometimes people initiate a chargeback without actually trying to return a product or to clear something up with you. And so if you've got a return policy or some kind of guarantee, just be really clear and transparent about what that is.
Or if you don't have that, in that case, just say pretty clearly this purchase is non-refundable. And that will help you if you ever have to dispute a chargeback because you can point to that policy on your website and say the customer understood, so we should not have to lose this chargeback dispute. Then you also want to keep detailed records and documentation for when those situations do occur. Also monitor your chargeback ratio. Like if you're going to have more sales, then eventually you're going to have like more sales equals more problems.
But as long as your percentage is really low, you want to keep that percentage under 2% usually. And if you notice an increase in chargebacks, see what's going on. Like, is there something happening? Is there a problem with your product or service? Is there fraud that's happening to you, actually?
Is somebody using other people's credit cards or something like that? And then maybe one more thing, you can also consider chargeback insurance or a guarantee program. There are some payment processors that offer this kind of chargeback insurance that protects you from the financial impact. But that just kind of adds one more layer of complexity. So it depends on your business, your industry.
Normally, I think it's better to just try to prevent these things as much as possible. Respond to them if they do come up. You'll usually get an email notification. You got to go and provide some info. And it's annoying, but then you move on because hopefully 98% or more of your customers are happy.
And that's great. So focus on them. Thank you for the question. Listeners, if you have a question or comment, sidehustleschool.com/questions. New episode every day.
This is episode 2,737. Much more is on the way. My name's Chris Guillebeau. This is Side Hustle School. [Music]
From the Onward Project.
