What do you do when a tenant reverses a payment through their bank or credit card provider?
Many business owners see chargebacks as a cost of doing business. Thankfully, they’re less common in the self storage industry than they are in eCommerce. Less common doesn’t mean unheard of, though, and it’s important to know what to do to protect your revenue in the event of a chargeback.
Friendly fraud is the act of a customer—the one who made a transaction—initiating a chargeback through their bank or credit card provider without a legitimate reason.
It’s referred to as “friendly” fraud because the initial transaction and the fraudulent chargeback are both done by the same person: the legitimate cardholder.
Some sources even refer to these malicious chargebacks as cyber-shoplifting because the intent is ultimately to gain a product or service without paying.
So, now you know what friendly fraud is. You probably already know the basics of a chargeback being a reversal of payment.
But how exactly do they work? What do you need to know about chargebacks as a self storage owner?
In order to protect your revenue from friendly fraud, you should be armed with the knowledge of how chargebacks work and how to dispute them.
The chargeback process
Step 4 is the part that you should be most aware of as a self storage business owner. Thankfully, good self storage billing and accounting software should help through well-kept records!
Let’s take a look at a scenario you might encounter at your self storage facility.
A customer rents a self storage unit for a month, and at the end of the month, they choose to initiate a chargeback.
There are many reasons they could do it. Maybe they never actually ended up using the storage unit and believe they’re entitled to a refund. Perhaps they were unhappy about the storage unit. Or maybe they always intended to start a chargeback for a free month of storage.
It may not be common at your self storage facility, but the possibility isn’t unheard of. The rise of eCommerce—and the rise of stolen credit card numbers—has led to many more consumers being aware of chargebacks and how to initiate them.
It’s also true that there are many businesses that just don’t contest the chargebacks, instead choosing to ban the customer from doing further business and taking the loss of revenue. But if you keep exceptional records with your self storage software, you should be able to fight back and retain that money that you rightfully earned!
It’s important to understand your self storage payment processor, too, because you may lose more than a month’s rent: you may also have to pay fees associated with the chargeback.
It’s impossible to keep customers from attempting fraud if they really want to.
However, there are things you can do to set yourself up for success in disputing fraudulent chargebacks and to make sure you aren’t doing anything to lead to legitimate chargebacks.
Keep exceptional records. If you keep good records using your property management software, you should have some proof to present to the banks to dispute the chargeback. This will be your best tool for challenging the chargeback. Anything that connects the cardholder to the initial transaction and provides proof that you followed all rules for merchants would help your case.
Follow credit card acceptance guidelines and best practices. Make sure you are following the guidelines and best practices that both credit card companies and third-party organizations have established for the acceptance of credit cards. If you do this, you’ll be less likely to run into chargebacks that are legitimate.
Set clear expectations and be transparent with customers. Some cases of friendly fraud are actually initiated not out of maliciousness but out of satisfaction with a product or service. Customers may find it easier to initiate a chargeback than to deal with your self storage business if they feel like they are entitled to a refund due to something not meeting their expectations.
Don’t be afraid to fight. It’s important to protect your self storage facility’s revenue. Per Midigator’s chargeback report, 77% of merchants saw success in disputing chargebacks due to cases of friendly fraud.
What does friendly fraud have to do with your self storage business?
If you’re lucky, not a whole lot. However, it’s increasingly more likely that you’ll face a time when a customer initiates a chargeback to take back the money they’ve paid you.
As a self storage business owner, it’s important to know what to do ahead of time and in response to the chargeback in order to protect your business from losing the money it deserves. If the chargeback isn’t disputed, it’s even possible for you to be charged fees by your payment processing company.
Make sure to stay organized, always know what you should and shouldn’t do while accepting credit card payments, and set up clear expectations and routes of communicating with customers.
And don’t be afraid to dispute the chargeback.
Also, check out these other great posts about self storage software!
At StoragePug, we build self storage websites that make it easy for new customers to find you and easy for them to rent from you.
