Minimizing Credit Card Chargebacks

I was looking at my business credit card statement today to do a basic “audit” of the charges on the card and I found one charge that I couldn’t identify what it was for. Was someone charging my credit card when they shouldn’t?

That would make me angry, you don’t want to make me ANGRY! HULK SMASH! HULK CHARGEBACK!

Credit Card chargebacks are cool

One of the great things about credit cards is the protection that is offered to customers who make purchases with them. One of these protections is the ability to request a “charge back” for illegitimate charges. A charge back is basically asking your credit card issuer to reverse the transaction, returning the money to the credit card. This results in the merchant losing the money from their account and “charge back fee” being applied to the merchant’s account.

On the surface this seems to be a bad thing for the merchant and when examined in isolation it is1. But if we take a step back we can see that this protection allows customers to act with confidence that they are are not going to get ripped off when spending money on their card. This has allowed the use of credit cards to flourish, making it easier for merchants to accept payment, especially online. Without charge backs the growth of internet commerce would be stunted and much smaller today than if were without them.

So I consider chargebacks a “good thingTM” for both merchants and customers alike.

Back to my tale

So I was just looking at my credit card bill and noticed a charge from “CODE42 MINNEAPOLIS USA”. I was thinking “who is that? Prepare to be smited by the mighty Hammer of VISA!”, but then I thought, I better go and try and work out who these jokers are.

Engage the google brain!

So I googled Code42. “Hmm, they’re a software company, I like software companies!”

I clicked on to their webpage and saw that these jokers were actually the wonderful people behind CrashPlan, the backup software that I use. Crashplan is a great piece of software that backs up your computer to encrypted storage in “The Cloud“. But I’ll have to tell you more about that another time because this post is not really about that.

So, I’m really happy with CrashPlan, so happy that I am willing to pay them money for their stuff. That means that there is no need for a chargeback after all. But that got me thinking, I reckon these guys get a lot of chargebacks because of the way they have set up their merchant account. Because I like them I wrote them an email:

I suggest that you change your merchant account to say “CRASHPLAN MINNEAPOLIS USA” because I think it will be much easier for your customers to work out what that charge it for. An alternative would be to have “WWW.CODE42.COM MINNEAPOLIS USA”, this would be recognizable as a web address and people to quickly see that you are the company behind CrashPlan.

The point is that a simple change like the one I have suggested makes it much easier for their customers to identify who they are and why they are being charged. Another good option is to put an email address or a toll free number. The best option is determined by the type of customer you have.

Anyway, I think that if they make this simple change they will see less chargebacks and less time wasted on dealing with confused customers who have accidentally gone medieval on their merchant account.

So that is my good deed for the day and hopefully it can help others to minimize the amount of credit card chargebacks on their account.

Cheers,

-James

[1] There are times when chargebacks can be crippling to a merchant and very unfair. But on average I still think we are better off with them than without them.