How do you handle chargebacks as a small merchant?

Question

I've been building a tool to help merchants write chargeback dispute responses (chargemate.tech) and curious about the community's experience.Most merchants I've talked to lose disputes not because they're wrong, but because their responses don't match Visa/MC reason code requirements.How do you currently handle chargebacks? Do you respond manually or use any tools?

pseingatl · Accepted Answer

A dispute is one thing. A chargeback another. My understanding is that under Visa/MC rules, a chargeback must be given effect. That comes from testimony given by a Visa security officer in a criminal case. If that is not true, I'd sure like to know.

DivingForGold · Answer

28 years ago I ran a mailorder company before the internet became widely used. 99% of all merchant charges were MOTO (back then it was called mail order - telephone order, or MOTO). All the merchant providers discouraged MOTO charges, they preferred "card in hand" charges to prevent fraud.
In order to obtain the incredible low dispute ratio we sent almost all credit card paid orders by signature required - - a real pain (we learned quickly the only real disputes / chargebacks were the small no. of fraud cases who claimed they never received the merchandise).
Nowadays a huge percentage pay online by credit card and sellers just ship orders out, they just accept the disputes and chargebacks, some use special services that filter credit card numbers for potential fraud.
After some years our merchant processor cancelled our account suddenly without notice, their reason was they said that when we signed up we checked off the box that most of our charges would be "card in hand", yet they gave absolutely no weight to our stellar dispute / chargeback ratio. It crushed the business for months till we could obtain a new merchant processor who penalized us with a higher "discount rate" as they call it (their "cut of the action").
Not 3 or 4 years later I closed the business and never went back to accepting credit cards again. I was fortunate to discover a niche "blue collar" business with very high "tickets" I could run practically by myself with one day labor guy twice a week. These were quite wealthy customers which IMHO was 10x better than having 8 employees on payroll and handling hundreds of small orders. I insisted on being paid on site, at moment of completion of the job, checks, cash, or old fashioned wires only. They always complied, even though sometimes it might have been an inconvenience for them. I would characterize it as a construction or contracting business that involved scuba diving. That business made me a small fortune, now I am retired from it.
From my point of view the merchant processing business is a perilous road to walk. Just do a search on HN for complaints about Stripe and you will likely see dozens of distressed merchants who have been cut off or impacted by having their accounts suspended or otherwise hurt.