Chargeback fees are a common frustration for ecommerce businesses in Australia. They are expensive realities, costing some companies thousands of dollars a year.
Chargebacks can represent a significant loss to your bottom line if you’re running an online store via WooCommerce.
For this reason, chargeback protection is absolutely critical. Below, we’ll outline exactly what is a chargeback plus what you can do to avoid them.
What is a chargeback fee?
A chargeback occurs when a fraudulent or disputed transaction occurs on your ecommerce website.
It’s the process of returning funds to a cardholder because the cardholder disputes the transaction or claims the transaction was fraudulent.
A chargeback fee is the fee you as a website owner must pay to a bank when this disputed / fraudulent transaction occurs on your website.
Funds are returned to a customer who has disputed a transaction that has occurred on your online store. The chargeback fee is what the bank or card company charges to cover their costs of handling the dispute.
For example, let’s say you run an online t-shirt shop, and Michael is one of your customers. Somebody stole Michael’s credit card and used it to spend $100 on your website. Michael might then discover that fraudulent transaction and would dispute it with his bank. That $100 would be returned to him and your t-shirt website would lose $100.
Additionally, your t-shirt website would incur a ‘chargeback fee’ charged by the bank.
How much are chargeback fees?
Chargeback fees usually range from $15 to $25 AUD per disputed transaction.
Below, we’ve outlined a quick summary of the chargeback fees for the most common payment gateways used in Australia on WooCommerce websites (current as of October 2021):
|WooCommerce Payments||AUD $25|
|Square Up||AUD $0|
|ANZ eGate||No amount visible in any documentation or agreement. However, ANZ states that “You are liable for all chargebacks under Condition 12 of the ANZ Merchant Services General Conditions”.|
|NAB Transact||AUD $25|
As you can see from the above, all the major WooCommerce payment gateways used by Australian ecommerce businesses have significant chargeback fees. This is why you must learn about chargeback fees and how to prevent them.
So if one day your website happens to be targeted with a large volume of stolen credit card transactions, it could easily cost thousands of dollars in chargeback fees (which, unfortunately, we’ve seen multiple times before).
Reasons behind a chargeback
In our experience, the most common cause of chargebacks for ecommerce websites in Australia is malicious individuals (also known as “hackers”) testing stolen credit cards on your ecommerce store.
As you may already know, there is a large market for stolen credit cards on the dark web and once people secure those stolen card details, they will try to test these cards on unsuspecting ecommerce stores.
If they can complete the transaction successfully on your website without chargeback, this means they might try a larger transaction to an account they directly control.
How to avoid chargeback fees
If you run an Australian ecommerce or WooCommerce site, there are four main things you can do to maximise your chargeback protection.
Choose the right payment gateway
The most effective way to prevent chargeback fees on your website is to use a payment gateway that simply won’t charge you a chargeback fee at all!
There are a few WooCommerce payment gateways that do this for Australian business, including:
- eWay (when signing up to their “Fraud Essentials” or “Fraud Ultimate” plan)
- WooCommerce Braintree (when using their 3D Secure verification tools)
- WooCommerce Stripe (using the “Stripe Checkout” feature which you can install using this plugin)
- CommWeb (a complicated process – it requires setting up an account with the Commonwealth Bank and configuring your setup within both CommWeb and the and the Mastercard Gateway WooCommerce module)
Undeniably, choosing the right payment gateway the most important step you can take to protect against chargeback fees and fraudulent transactions on your WooCommerce website.
Add Captcha to any pages to the Checkout (and any page with payment forms)
CAPTCHA is a security measure that helps protect your website from spammers and malicious robots trying to access your website.
We find that the official reCAPTCHA for WooCommerce plugin is one of the most effective solutions for this. It does the job well and provides flexibility to add reCAPTCHA on any WooCommerce page you want.
We recommend adding the reCAPTCHA function on every checkout and payment page on your website.
Add firewall protection
The purpose of a firewall is to block bad traffic or activity. If you have a good one in place, it can stop bots and malicious users before they even get a chance to proceed to the checkout or payment.
If your ecommerce website’s audience is only Australia-based, for example, you could easily add firewall rules to block traffic from certain countries on checkout pages and other pages that contain payment forms.
Use WooCommerce fraud protection plugins
WooCommerce fraud protection plugins do exactly what you’d expect fraud protection to do. It allows you to auto-block or place into review orders that meet certain fraud criteria, providing you an overall “fraud score” rating for each order.
Our recommended WooCommerce Fraud Protection plugin would be the one recommended by WooCommerce itself, WooCommerce Anti-Fraud.
Get chargeback protected as soon as possible
It’s essential that your ecommerce website gets chargeback protection as soon as possible. With the current rate of internet fraud, it’s imperative you’re set up to prevent charges that you can’t control (and are charged for reasons that aren’t your fault).
The first step of selecting the right payment gateway is undeniably the most important step you can take. The remaining step relate to adding barriers against possible fraudulent transactions.
But without choosing the right payment gateway, it is still very possible for malicious actors to pass these barriers and successfully use stolen credit card details on your website – thus attracting chargeback fees for your business.
Furthermore, getting the right payment gateway setup with chargeback fee protection is often not as easy as just adding a plugin to solve the problem.
All of these solutions require an experienced web developer to help you setup and troubleshoot the configuration.