Chargebacks. Ugh. They’re helpful when you have your customer hat on and someone stole your credit card, or your online order never arrived at your house. But when you’re a business owner, they can be a huge pain in the ass — especially if you did everything right on your end.

There’s no way to totally avoid chargebacks until the end of time, but there are ways to minimize the risk of having to deal with them. Read on to learn how to avoid chargebacks, keep more of your money, and protect your biz below.

What is a chargeback?

A chargeback is when a customer disputes a charge on their card with the issuing bank instead of a business. The customer will typically ask the bank to reverse that charge after making a purchase. 

The issuing bank then investigates the dispute. They’ll either rule in the customer’s favor and reverse that charge, or they’ll rule against the claim, meaning the charge will stay. The customer may even have to pay a penalty depending on the bank. 

Why chargebacks happen

Why might someone file a chargeback rather than reach out to the business first? There are a number of reasons, like:

• Multiple orders of the same item
• Unhappy with the item
• A failed shipment
• A refund that was promised but didn’t go through
• Fraud
• A non-existent or terrible return policy

A customer may actually reach out to the business first but not get the answer that they wanted. For example, if someone isn’t happy with a product but it’s non-refundable, they might file a chargeback to receive their money back that way.

In a perfect world, a customer who makes a mistake with their purchase or is unsatisfied with it would contact the business first and find a solution with the owner. (Actually, in a perfect world, I guess the mistake wouldn’t happen in the first place. Anyway!) 

But that’s wishful thinking. Chargebacks may happen even if you do everything right on your end. The best way to avoid chargebacks as much as possible is to have solid policies and good customer service.

Have a solid refund policy

The best defense is a good offense. Or wait, is it the other way around? In any case, one of the best ways to protect your business against chargebacks is to offer a smart refund policy to your customers.

I already covered the importance of having a refund policy for your digital product shop on the blog, but since it is that important we can talk about it again! It is a key step in launching and growing your digital product shop, because it boosts your reputation and inspires trust in your customers.

Think about how often you buy something off the internet when there’s no chance of getting a refund. You don’t always know if something will look, feel, or perform the way it’s marketed on the internet. That’s why some people hesitate to buy…unless they know they can return it.

Making your refund policy clear to potential customers signals to them, “Hey, I sell high-quality digital products that are worth it! But if you’re not happy with what you buy, it’s totally okay.” 

Check in with your customers after they buy

Another way to be proactive and protect yourself against chargeback requests? Provide amazing customer service. More specifically, ask customers what they think and how they’re doing after they buy something from your shop!

I have an entire post dedicated to what steps you should take after a customer makes a purchase, but I’ll recap real quick here. After your customer has had some time to use your digital product, ask them how it’s going. If it’s not going well, be sincere and find a solution that they’ll appreciate, whether it’s a refund, store credit, or replacement item.

Make the extra effort to provide an amazing customer experience, and you might just catch an unhappy customer before they decide to file a chargeback.

Use a clear transaction description and biz name

Ever looked through your bank statement and wondered what in the world some of your transactions were? 

Maybe the merchant name sounded unfamiliar or the transaction description was a bunch of random letters and numbers. The amount of the purchase didn’t ring any bells either, so you prepare to file a chargeback…until that shirt you bought on Etsy arrives on your doorstep. Crisis averted.

Your customers may realize their mistake before their chargeback request goes all the way through, but think of it this way. If it happened to one person, it’ll probably happen to another. Plus, your customers may not think it’s worth purchasing from your digital product shop again. 

Bottom line: Provide a clear transaction description and merchant name. 

Have an FAQ page for your digital product shop

Anticipate the questions your customers may have and answer them in an FAQ. Having certain questions already answered can help customers find the information they need before they get angry, demand a refund, and file a chargeback.

For example, you can bet that someone will have questions on how to download their digital product or how to use it properly. They may wonder if they have lifetime access to it or what file formats the product comes in. Answer those questions in your FAQ and make your FAQ easy to find on your website.

Oh, and it’s a good idea to link to your refund policy and support request page in your FAQ. Just sayin’.

Do what you can to avoid chargebacks

Ultimately, there’s no surefire way to completely avoid getting chargebacks. They exist for a reason! You can do everything right as a digital product shop owner and still have to deal with a chargeback or two in your lifetime.

However…

• Having a clear and generous refund policy
• Checking in with customers after they buy
• Using clear, recognizable merchant names and transaction descriptions
• And having an FAQ on your shop website

…are steps in the right direction. Do these, and I bet you’ll spend less time fighting random chargebacks.

If you’re wondering how to set up your own refund policy in Shopify, I have a video that can walk you through the process! Take a look below.