Beware of credit card disputes when selling online

Last month we talked about why I choose not to offer store credit to my customers. I mentioned that I prefer that my customers use credit cards to purchase their materials, that way I don’t have to extend the risk of store credit and the customer can manage their own rewards program through their credit card company. Usually, there aren’t many problems when customers use credit cards. But, in this month’s column, I want to talk about credit card disputes.

Very rarely is a credit card dispute an issue at The Deck Store, but once we got into selling products online, we found that credit card disputes had become more frequent. I think that this is due to the fact that online customers are essentially anonymous. They’re not the builders who come into the store and who have developed relationships with me and my staff. They think we’re just the people at the other end of the computer, and therefore, they’re not as inclined to work with us if they have an issue.

The main reason we see credit card disputes is because of stolen credit cards. Unfortunately, there are a lot of dishonest people in our world. Even though our website has credit card verification precautions that catch a lot of fraud, the criminals sometimes get smarter.

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The number two reason we get disputes on credit cards is because of impatience or trust issues. If we by chance make an error on a shipment, we find that online consumers are increasingly less likely to wait the day or two for us to get the correct product to them, and instead they refuse the purchase through their credit card. Those disputes automatically cost us retailers $25. It doesn’t matter who is right or who is wrong, the seller pays $25 to the credit card company for the dispute fee.

What many consumers don’t realize is that we can’t just process the transaction once they see that the correct product has arrived. We’re not able to do that until the consumer also goes through the dispute process and confirms to the credit card company that the dispute is resolved. In the end, that dispute cost me $25 and a lot of time. In one case, when the purchase was just for two deck lights, that $25 was more than my profit on the lights to begin with.

Because we’re invisible people on the other end of an online transaction, there is a less willingness to ask questions on the part of the consumer. By operating an online retail outlet, customers don’t necessarily know how small we really are. They might think we’re as big as Amazon and not realize we’re a single-location lumberyard.

Major fraud doesn’t happen very frequently, but has happened a couple times. In one instance, a gentleman bought some railing, paid on a credit card, and a couple weeks later bought the same thing but shipped to a different address. Another order followed after that. He then disputed the charges with his credit card, saying he never received anything and that it wasn’t even sent to his home address. I later called him and found out what he had done, and began a legal process through his credit card company.

In another case, a woman in New York had ordered decking from us. She then claimed that she didn’t like the color and demanded that we send her a different color decking and that we handle the shipping costs. It costs a lot to ship decking from Minnesota to New York, and our website clearly states that we do not handle return shipping in cases like hers. So, the customer just disputed the charge through their credit card. In order to bypass our policy, she told the credit card company that she had received the products damaged. By the time the product did finally arrive back to us, it was damaged because of how the customer shipped it, and even though I had the original email from the customer stating that she didn’t like the color, the credit card company still held us liable and withheld payment. I ended up with a waste of time and money and a pile of damaged decking.

If this person had been an in-store customer, we could have shared samples. Had she called, we could have shipped a sample so that she could see the color before making the purchase. Instead, it led to a credit card dispute and unfortunately, those disputes rarely work out in favor of the retailer.

In essence, disputes become expensive when you consider the time involved in working with the credit card companies. Keep in mind that even though your policies may seem to cover fraud situations, unfortunately not everyone on the other end of an online transaction is an honest customer.

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