Cardholder Behavior Surrounding Chargebacks and Payments

Sydney VaccaroConsumer InsightsLeave a Comment

Cardholder Behavior Surrounding Chargebacks and Payments

Every merchant who takes card payments, either online or in-store, has to deal with disputes. This is why Aite Group, under the sponsorship of Ethoca, surveyed consumers, merchants, and credit issuers to create the Improving the Dispute Experience: Transparency Is Power whitepaper.

Let’s walk through some of the findings of this study to learn how merchants can reduce and manage chargebacks.

Notable Findings About Cardholder Chargeback Behavior

Cardholders are more likely to research charges on a debit card that they don’t recognize than credit before contacting their card companies or banks. The study found that 75% of credit cardholders and 83% of debit cardholders carried out some research about charges that they did not agree with or recognize before contacting their financial institutions to open a dispute. While this is a majority of cardholders, it still leaves 25% of credit cardholders who do not research before talking to their issuing bank.

Cardholders contact their bank or credit card company first if they find a charge that they don’t recognize or agree with. The study found that 73% of credit card holders and 75% of debit cardholders first contact their financial institutions instead of merchants should they find a charge that they don’t recognize or agree with. This cardholder behavior is frustrating to merchants because it prevents them from resolving the problem before it becomes chargebacks.

A large number of cardholders retain their purchase receipts. The study found that 83% of consumers keep their receipts after transactions. Top reasons for keeping receipts are:

  • If they may have to return the item (62%).
  • If there is a difference in what they were charged or what they were charged for (48%).
  • To carry out bank reconciliations (32%).
  • They like the comfort of having receipts (32%).

This behavior shows that cardholders know their rights and protections for card payments and are preparing to prove that the transaction is invalid by keeping receipts.

Key Takeaways for Merchants on How to Manage and Reduce Disputes

From the findings of this study, merchants can implement some changes to manage and reduce chargebacks.

Merchants Should Provide More Transaction Details on Receipts

As things currently stand, most transaction descriptions are a series of letters and numbers that cardholders don’t understand. In fact, the study found that 27% of disputed transactions turned out to be the correct charge that the cardholder had forgotten about.

Since most cardholders research unknown or incorrect transactions before opening disputes, more transaction details will encourage cardholders to contact merchants directly or help them recognize the transaction. When cardholders contact merchants first, there is an increased chance of resolution or clarification, which reduces disputes.

Cardholders have also stated that they are interested in more information about their transactions. 63% of the surveyed cardholders were very interested in more transaction information. Providing more information can reduce chargebacks while increasing customer satisfaction for merchants.

Online Merchants Should Provide Sufficient Details to Their Customers

Frequent online shoppers have expressed an interest in more transaction details because of the increase in fraud in card-not-present online transactions. This information will also help merchants fight chargebacks related to friendly fraud.

Merchants Should Also Provide Their Contact Information on All Receipts

For cardholders to contact merchants first, all contact information must be readily available to them. Merchants should prominently display their customer service numbers in addition to other transaction details to help prevent disputes before they happen.

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