3 Tips for Credit Repair Merchants to Minimize Chargebacks

Business is booming for the credit repair industry, because Americans need help improving their credit score for all sorts of things, from getting a mortgage, to getting a job. Unfortunately, due to the nature of the clientele, chargebacks are an inevitable (and growing) part of the business. That’s because often customers utilizing credit repair services are in financial distress, and those same individuals are particularly prone to engaging in friendly fraud. Friendly fraud, in this context means a credit repair customer who ordered the service, received the service, paid for it with his or her own credit card, but for whatever reason, (often to alleviate personal cash-flow concerns) decide to chargeback the credit card purchase and seek to obtain the services for free.

Why Chargebacks are Particularly Bad for Credit Repair

This can be devastating for credit repair business owners because not only does it mean that they’ve worked for free, but there are usually additional fees associated with receiving a chargeback from their credit card processor, plus if their chargeback ratio exceeds 2%, they’re in danger of having their credit repair merchant account terminated due to excessive chargebacks.

What You Can do to Minimize Chargebacks

There are, however, a few tools at a credit repair company’s disposal that can help you minimize chargebacks.

Tip 1: Require CVV / AVS

When you accept a credit card payment (whether over the phone or via your website) always require the customer to enter their CVV code (the 3 or 4 digit code on the back of their credit card) and their zip code. Then make sure that your payment gateway is configured to require a CVS code and AVS (zip code) match before the transaction goes through. Not only does this simple step eliminate the ability of most individuals with stolen credit cards to use them (most stolen credit cards purchased on the black market don’t include this data), but it provides compelling evidence that the customer actually had the card in their own possession when the purchase was made, defeating a common chargeback reason code that the card had been stolen.

Tip 2: Require eContracts

Adding the ability to send eContracts through a service like DocuSign or DocHub is fairly cheap to implement ($5 – $30 per month). And when an eContract is signed, the customer’s IP address and email address is tracked making it incredibly difficult for the customer to argue “it wasn’t me” when disputing a charge.

The second thing it accomplishes, is that it all but eliminates the “I didn’t agree to pay that much” or “They promised me my credit score would be X” chargebacks, because the terms of your agreement, including pricing and disclaimers about guarantees will all be located in the eContract.

Tip 3: Use Chargeback Alerts

Those first two tips will go a long way to helping you discourage customers from initiating a dispute, and when they do, helping you win the chargeback. (And remember, winning chargebacks is important not only to make sure you keep your revenue but because most ‘won’ chargebacks don’t count against your merchant account’s chargeback ratio.)

But this third tip, using chargeback alerts, will actually help you avoid customer disputes turning into chargebacks.

Chargeback Alerts, is a service that you can sign up for. When a credit repair customer of yours calls their issuing bank to complain about a charge, if that issuing bank also participates in chargeback alerts (about 25% do) then instead of the dispute immediately turning into a chargeback, you’ll be provided with a 24 to 72 hour window in which you can choose to simply refund the credit card charge. And if you do, the dispute doesn’t turn into a chargeback, nor count against your merchant account’s chargeback ratio.

And while it’s certainly true that issuing a full refund means your credit repair company has worked for free, it will allow you to avoid the chargeback fees your credit card processor will charge you, and most importantly will help ensure that your merchant account doesn’t get terminated due to chargebacks.

Conclusion

There are a number of things that credit repair businesses can do in order to minimize, avoid and then win chargebacks. While it may seem unfair that you’re having to deal with customers who you legitimately provided services to, but who, for their own nefarious reasons are seeking to get the services for free via a chargeback, it’s simply a part of the credit repair industry. And if you don’t tackle that issue head on by being pro-active, you’ll almost certainly face additional costs in the form of fees and unnecessary refunds, and may end up having your credit repair merchant account terminated as a result.

Quick Sales Pitch:

Soar Payments offers credit repair credit card processing, but we go well beyond that. Our credit repair merchant accounts come pre-integrated with chargeback alerts, our payment gateway is setup to require AVS / CVV transactions and automatically scans transactions for signs of fraud, and finally our integrated chargeback management program will automatically pull eContracts from your account to use to help you win chargebacks… automatically. So, if you need a credit repair merchant account, apply online.