Chargebacks are an unfortunate reality for online Business owners. If you handle sufficient order volume, eventually you’ll have to deal with a customer who requests a chargeback—and how you approach this necessity of business could drastically improve or lower your chances of eventual success.

As Square explains them, chargebacks are instances of customers attempting to stop and/or reverse a credit card payment for your goods and services. The customer files a chargeback request with their issuing bank, which then reaches out to your merchant bank for proof of the purchase. These financial institutions will come to an agreement about who is liable for the charge, and in the case of fraud, the merchant is always responsible. Your business may also be subject to fees and scrutiny from your issuing bank.

Tips for Managing Chargebacks

So how can you manage chargebacks effectively, to reduce your liability, reduce the total number of chargebacks you face, and even improve your reputation at the same time?

#1. Know the fees and consequences.

First, you need to understand what chargebacks are, and what you’ll be liable for. In the case of actual fraud (when a customer’s credit card is used without their authorization), the business is responsible for the costs associated with the transaction. For example, if a customer’s credit card is stolen and used to purchase $1,000 of goods from your business and the customer files a chargeback, your business will be responsible for the $1,000 of merchandise without reimbursement.

This is largely unavoidable. Beyond that, you may be subject to fees from your payment gateway or merchant bank—usually a per-chargeback fee of $20 to $50. You shouldn’t plan to have lots of chargebacks—in fact, you should avoid them as much as possible—but they are a reality of business when you handle credit card transactions online, and you should have some kind of budget for them.

#2. Document everything clearly.

The best proactive measure you can take to protect your business from excessive chargebacks is to document everything as clearly as possible. Let your customers know what your return policies are, describe your products accurately and in great detail, and set firm expectations for your customers.

You’ll also want to obtain signatures, and have a consistent documentation policy for all your customers’ purchases. When the issuing bank reaches out to the merchant bank, the first thing they’ll ask for is proof that the customer actually made the purchase in question. If you can provide ample documentation to show that the customer knew what they were getting and intentionally paid for it, chances are the chargeback will be denied.

#3. Ship reliably.

Many chargebacks unfold because a customer didn’t receive a shipment on time (or at all). You can prevent this type of chargeback almost entirely by using a more reliable delivery service, making sure to get a customer signature upon delivery to further protect yourself.

Different companies and organizations offer different levels of shipping protection, so it may be worth the extra investment in the next step up. If you notice a significant amount of shipping errors or related complaints, it’s time to consider switching providers.

#4. Offer stellar customer service.

The better customer service you offer your customers, the fewer chargebacks you’ll see. Most customers will contact the business to settle a dispute before reaching out to their respective credit card company, so use this opportunity to explain the situation, offer a return, exchange, or refund, and keep the customer happy so they don’t complain to their card issuer. Train your customer service staff in conflict resolution, and take the time to understand what happened in each instance from the customer’s perspective. A little bit of understanding goes a long way.

#5. Institute a grace period for returns and price matching.

Sometimes, a customer will be unsatisfied with their purchase (even if your products are amazing). It may not be what they expected, it may be faulty, or your customer may find a lower price elsewhere. For these circumstances, it’s good to offer a “grace period” with free returns and/or price matching. This can help you reduce the number of chargebacks you get from unsatisfied customers.

#6. State your business name clearly.

A peculiarly common reason for chargebacks is an easy one to clear up: customers don’t recognize your business’s name on their credit card statements. You can easily prevent this by stating your company name clearly on all bank statements. For example, if your website is branded with a name that’s different from the corporation that formally owns it, make sure the website’s name (and not the unseen corporation’s) is the one that appears on statements.

#7. Improve your business over time.

This last tip is a general one, but it’s important to implement. Take the time to learn from any chargeback experiences you face, and take note of any problems that your customers experience. For example, if you notice a pattern of dissatisfaction in the reviews of a particular product, see if there’s a way you can improve the product—or remove it from your store entirely.

If you’re getting bad feedback about your shipping times, consider upgrading your provider or establishing more warehouses so you can ship products out faster. The more you learn from customer feedback, the better you can make your business in everything from production to customer service, and the fewer chargebacks you’ll see.

Fully Eliminating Chargebacks

Unfortunately, it’s virtually impossible to eliminate chargebacks altogether. While a rate of higher than 1 percent is seen as a marker of a risky or unscrupulous business, it’s not uncommon to see rates of 0.5 percent to 0.8 percent for a normal business. That means, for every 1,000 transactions, you can probably expect 5 or more chargebacks—even with excellent business practices. The best you can do is reduce their likelihood, and remain committed to providing your customers with the best products and services you can offer.