How to Reduce Chargebacks at Your Smoke Shop

From saving your fellow caveman from a swift demise at the paws of a sabertooth in return for berries at the fire later, to Norm buying his nth beer on his good word alone; the concept of credit has been around since the dawn of mankind.

How exactly this credit manifests itself throughout the ages however has constantly been evolving, whereas before you’d need a flock of chickens to prove you’re good for that barrel of cider, now you keep your credit on a tiny plastic card kept in your wallet, crammed between your government I.D. and a forgotten WaWa punch card.

While many a convenience has been gleaned for the common shopper courtesy of credit, it proves true the adage that with great power comes great responsibility, and let’s just say some customers have chosen to use this power for uh… not good.

That’s because growing in tandem alongside credit all these years, has been their evil toothy tumor of a step-brother, FRAUD! With the freedom of cashless transactions, unfortunately both unscrupulous customers and merchants have arisen to wreak havoc on safe transactions.

To mitigate these disputes, the credit card processing companies opened Pandora's box to conjure a demonic entity only known as “Chargebacks”. So what are these awful things? Why are they coming to my smoke shop? And how in the h-e-double-hockey-sticks am I going to get rid of them?

Well friends, Got Vape Wholesale is here to help you safely relocate these monstrosities called chargebacks, to a completely different plane of existence. Read on in this Smoke Shop Blog breakdown of what exactly credit card chargebacks are, how they affect you, and how we can avoid them in the future to save your bottom line.

Table of Contents:

What is a Chargeback?
What Causes Chargebacks?
Why are Chargebacks Bad for My Smoke Shop?
What Happens if I Keep Receiving Charge Backs?
How Do I Reduce My Smoke Shop’s Chargeback Risk?
Posting Clear Purchase and Refund Policies
Protecting Yourself with EMV (Chip Card) Readers and Pin Codes
Descriptive Titling of Your Charges
Properly Signed Receipts
Superb Customer Service As A Means of Prevention
Act Quickly
In Conclusion

What is a Chargeback?

A chargeback is defined as when a completed credit card transaction is reversed and the customer receives their money back. This is done at your expense and means that in the eyes of their bank or credit card company, you are guilty until proven innocent. They will assume the charge of fraud against you is legitimate and you will lose the money you had already earned.

This comes courtesy of the 1968 Truth of Lending Act and its amendments within the Fair Credit Billing Act, which were designed to protect citizens from predatory fraudsters taking advantage of them.

While the law does provide customers with necessary protection from predatory scammers, the issue can arise where people are misrepresenting the truth in order to get their charge dismissed and their products for free.

These acts also give you, the merchant some protections, but all of those hinge upon you being able to provide the correct evidence to combat disputed charges. We will dive into how you acquire this evidence to protect yourself a little bit further down.

What Causes Chargebacks?

Chargebacks can occur for many reasons, and it’s important to know what causes them in order to avoid these very same pitfalls with your Smoke Shop. These are some common causes:

The credit card you completed the transaction was stolen and the rightful owner is disputing the charges made on it. Stolen credit cards represent an immense risk to your business, as this will typically be an open and shut case against you. The fraudster gets the goods and you’re left footing both the bill and the damage to your businesses credit reputation.

Chargebacks can also be triggered by customers reporting that the intended product never arrived, was incorrectly billed, arrived faulty, or even for the honest mistake of a customer not recognizing the charge in their billing history.

All of these reasons are seen as equally valid in the eyes of the credit card company, making it a bit of a game of whack-a-mole for you to successfully avoid all of them.

Why are Chargebacks Bad for My Smoke Shop?

As Smoke Shops already get the short end of the stick when it comes to credit card processing, chargebacks take it from bad to worse. Chargebacks are very similar to speeding tickets in that you will have an immediate cost and a delayed cost; both of which are destructive to your finances.

First off you lose the sale and if the product was shipped, potentially the entire item itself. This is the worst possible scenario and directly bleeds you of money.

After that you will most likely be charged a fee for allowing the chargeback to occur, this is your credit card processor’s way of cattle prodding you into avoiding these like wool socks on a hot day at the farm. It’s a tough love situation, if there ever was one, to inspire shops to do their due diligence when completing transactions.

Lastly when you do lose sales to charge backs, you aren't just losing the monetary amount of the product you also all of the opportunity costs that you’ve invested. Every expenditure from the electricity, to employee salaries is a net loss for that sale, so you are in fact losing much more than just the sticker price.

What Happens if I Keep Receiving Charge Backs?

Should your Smoke Shop receive a slew of charge backs or consistently accumulate them throughout the year, you are going to see your premiums for processing skyrocket. This further erases your profits and will make continuing your business more or less resemble a slow moving car crash.

If you still continue to receive chargebacks, your merchant may even go as far as dropping you, which is about as catastrophic a result as you can get. Losing your credit card processor is a major headache that you do not want to go through, finding a new one will be much harder and in between you will lose out on all your potential credit card sales.

Different merchants will have different models for what happens when you receive chargebacks and some even go so far as to claim they protect you from it. The naked truth of it all is that you shouldn’t take their word on it and instead do your due diligence of completely reading the policy to avoid any ludicrous charges that may arise later.

How Do I Reduce My Smoke Shop’s Chargeback Risk?

While there is nothing you can do to 100% mitigate your risk of chargebacks, there are many things you can accomplish that will protect you from most of it.

The following pointers are meant to be accomplished in tandem, as only when you have everything correct in your shop, are your defenses truly raised. One crack in the rampart can bring your whole house of cards down, so make sure to heed this advice as a whole instead of piecemealing it out as needed.

Posting Clear Purchase and Refund Policies

One easy way to reduce your back charge risk is to review your own shop’s purchase and return policy for any confusing text or potentially misleading language.

The goal of this exercise is to reduce any sort of ambiguity in your policies and to avoid having any potential dormant loopholes that open your shop up for chargeback risk.

You want customers to clearly know whether or not they can return items, so consider posting more signage at the front counter or at your point of purchase displays for greater customer awareness. A return is much much better than a chargeback, so allowing customers to potentially get a refund or receive store credit is a smart way to save yourself money.

If the items are not eligible to be returned, remember to mark that prominently as well in order to make sure customers are 100% informed when making the purchase.

Many items like vaporizers and glass are unable to be brought back, so make sure they know that before walking out of the store with it. This dodges them arguing for a chargeback on the grounds that you didn’t properly inform them of the purchasing terms.

Protecting Yourself with EMV (Chip Card) Readers and Pin Codes

A proactive step you can take in safeguarding yourself from chargebacks is by investing in an EMV reader or requiring the use of pin codes. Both of these methods are essentially providing you with the extra bit of proof needed to prove the charge was both legit and made with the consent of the card holder.

EMV Readers are named after the three companies who came together to create the chip method of verification, Europay - Mastercard - Visa. Thus the ability to insert your card instead of just swiping presents a whole new world of secure transactions, due to the more precise nature of chip readers.

For the utmost protection, you can require that customers use both a chip card and a pin code, to provide you with two bulletproof pieces of evidence to dodge that chargeback. While this can be a minor hassle for customers, it allows you to cover your bases for a relatively cheap amount of money when compared to how much you can lose to chargebacks.

Doing this will significantly reduce the risk of any stolen cards being used as well. Discerning when a card is fake is a tricky business, so just skip all of that by modernizing your point of sale with a chip reader.

Descriptive Titling of Your Charges

Sometimes the root cause of your chargeback can be as simple as a slip of the mind.

A customer had stopped in your shop and picked up a piece for 39.99 out the door. But when their credit card statement comes weeks later, they see “store X - 39.99” and don’t put it together that your shop was the origin of the charge. In their minds, this “mysterious” charge has appeared on their card and without any more info they assume it must be a mistake.

While this particular line of consumer psychology is up for debate, the fact is you are going to encounter chargebacks like this unless you take the extra step of making your charges abundantly clear to the customer.

This can be accomplished by listing both your full store name and the full name of the product on the charge itself, so that you can have two different reminders for the customer to recognize the charge as legitimate.

This will reduce their chances for error and also give you a solid defense when you are attempting to resolve this with the credit card company and your processor. That’s why we recommend making sure your charges are crystal clear and not just a generic “store x” receipt that can be lost in the shuffle.

Properly Signed Receipts

Before your customers bolt out the door, make sure to ask them for a signature on their receipt if using a credit card. While this can extend the duration of the sale, it gives you a much stronger defense in the case of them claiming a chargeback.

Keep all of your signed receipts in a careful location where they are safe from fire or water damage, should something catastrophic occur. Additionally, we recommend taking the extra step of scanning all of your signed receipts into a digital database to ensure you have them forever.

Superb Customer Service As A Means of Prevention

If all else fails there is always good old fashioned proper customer service to fall back on. This is your chance to endear yourself to the shopper and get them to see you as a person, instead of just a merchant they buy from.

The goal of this is to provide customers with a pleasant experience to reduce the risk of them biting the hand that feeds by charging back their purchase. This will make people more inclined to return an item that they were unsatisfied with, instead of going nuclear and disputing it with their credit card company.

Act Quickly

Above and beyond any of the aforementioned pointers, is the fact that if you do receive notice of a chargeback from your credit card processor - take care of it ASAP. To save your shop from a slow death by chargeback, hop on these charges as quickly as you physically can.

Once you see it pop up, start reaching out to your processor immediately, while at the same time go back into your database to retrieve all the info you have proving the sale was legit. Chargebacks are very much a game of hot potato where if you let it sit in your lap too long, you're burned and that’s it.

So do not let these things fester, make sure to act smart and with haste to ensure that your chargeback is deleted before it can hurt your bottom line.

In Conclusion

Now that we know all of their dirty little secrets, the ominous mystique of chargebacks has not only decreased but can now be tackled with proper knowledge. At the end of the day chargebacks and their prevention come hand in hand with running your shop as well as possible, while being a friendly beacon of a shop manager.

If you keep this in mind and follow these steps, I know your chargeback risk will decrease and your businesses will thrive. For more Smoke Shop news and tips, make sure to check back here at our Wholesale Vaporizer Blog for more good info on legal mushrooms and boosting your foot traffic.