chargebacks and Fraud Prevention
Key Takeaways
- • Kratom businesses face 2-3x higher chargeback rates than average retail
- • "Friendly fraud" (legitimate purchases disputed) is the most common chargeback type
- • Clear policies, shipping documentation, and billing descriptors prevent most disputes
- • Chargeback ratios above 1% risk account termination and MATCH listing
Chargebacks represent one of the biggest threats to kratom merchant accounts. Understanding why disputes happen and implementing prevention strategies is essential for maintaining processing capabilities.
Why chargebacks Happen
Common Dispute Reasons
Friendly Fraud (60-70%)
- • Customer doesn't recognize billing descriptor
- • Family member disputes purchase
- • Buyer's remorse after purchase
- • Customer disputes instead of requesting refund
Legitimate Disputes (30-40%)
- • Product not received
- • Product quality issues
- • Wrong item shipped
- • Actual credit card fraud
Prevention Strategies
Clear Billing Descriptors
Your billing descriptor appears on customer statements. Poor descriptors cause confusion and disputes:
- • PROC*MERCHANT123
- • GATEWAY SERVICES
- • Random abbreviations
- • company NAME
- • YOUR BRAND 800-XXX-XXXX
- • COMPANYNAME.COM
Shipping Documentation
- ✓ Signature required: For orders over $100, always require signature
- ✓ Tracking on all orders: Provide tracking numbers immediately after shipment
- ✓ Photo documentation: Photograph packages before shipping for high-value orders
- ✓ Insurance: Insure packages to cover loss/damage claims
- ✓ Delivery confirmation: Use carriers with reliable delivery confirmation
Refund Policy Best Practices
A customer-friendly refund policy reduces disputes:
- ✓ Clear 30-day return window prominently displayed
- ✓ Easy refund request process (simpler than chargeback)
- ✓ Prompt refund processing (within 3-5 business days)
- ✓ Refund policy link in confirmation emails
- ✓ Customer service contact information on packing slips
Fraud Prevention Tools
AVS Verification
Match billing address to card records
CVV Required
Always require 3-4 digit security code
3D Secure
Bank authentication shifts liability
Velocity Checks
Limit orders per card/IP/device
Device Fingerprinting
Identify suspicious devices
Chargeback Alerts
Ethoca/Verifi for pre-dispute refunds
Fighting Chargebacks
When disputes occur, respond promptly with compelling evidence:
- Order confirmation: Email with date, items, and customer acknowledgment
- Shipping proof: Tracking number, delivery confirmation, signature
- Communication logs: Any customer service interactions
- Policy acceptance: Proof customer agreed to terms at checkout
- AVS/CVV match: Documentation of successful verification
Frequently Asked Questions
What chargeback ratio is acceptable?
Keep chargebacks below 1% of transactions. Above 1% triggers card brand monitoring programs. Above 2% risks account termination.
Should I fight all chargebacks?
Fight chargebacks where you have strong evidence. Sometimes accepting small disputes is more cost-effective than representment.
How do chargeback alert services work?
Services like Ethoca and Verifi notify you before a dispute becomes a chargeback, allowing you to refund proactively and avoid the chargeback count.
What is 3D Secure and should I use it?
3D Secure adds bank authentication (Verified by Visa, Mastercard SecureCode). It shifts fraud liability to the bank and reduces disputes.
How long do I have to respond to a chargeback?
Typically 7-14 days from notification. Respond as quickly as possible with complete documentation.
Can I blacklist customers who file chargebacks?
Yes, maintaining a database of chargeback filers and blocking their future orders is a standard practice.
Ready to Get Started?
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