Get All Access for $5/mo

Online Merchants Are Losing Significant Revenue With This Billing Mistake — Are You Guilty? With clear, recognizable billing descriptors, merchants can save themselves the headache of avoidable transaction disputes and keep their customers happy and returning.

By Monica Eaton Edited by Micah Zimmerman

Key Takeaways

  • Billing descriptors act as digital fingerprints for businesses, helping banks and buyers recognize transactions.
  • But if confusing or unclear, they can lead to chargebacks, reputational damage and lost revenue.

Opinions expressed by Entrepreneur contributors are their own.

Do you know that line-item text that shows up on your debit or credit card statement that explains where each charge comes from? That's commonly referred to as a billing descriptor. It's a crucial piece of information that outlines the specifics of a transaction and the company associated with the charge.

A merchant usually establishes the billing descriptor when they set up their bank account. Descriptors may be static or dynamic, meaning that they can change to reflect the specifics of the transaction in question.

Think of billing descriptors as unique digital identifiers for each business. This numeric marker helps banks and credit institutions recognize the company while also helping buyers differentiate individual transactions.

Unfortunately, inaccurate, confusing or unclear billing descriptors are a common problem. According to the 2023 Chargeback Field Report, one-third of cardholders say they often found billing descriptors on their bank statements to be confusing or unrecognizable.

Additionally, nearly three-quarters of merchant respondents did not even know what their billing descriptor looked like. This suggests that merchants are not taking the problem of billing descriptor misidentification as seriously as they should. That's a problem, as bad descriptors can directly cause chargeback.

Related: How Banks and Businesses Can Fight Fraud and Chargebacks Should Regulation Fail

Bad billing descriptors can cost you

Billing descriptors directly impact a customer's understanding of their credit card statement. As such, they play a vital role in a customer's trust and satisfaction with a business. Poorly worded or confusing billing descriptors can pose significant issues for merchants, including:

  • Customer confusion: A vague or unrecognizable billing descriptor can leave customers perplexed. If customers can't identify a descriptor on their statement, they might not be able to identify the source of the transaction.
  • Chargebacks & disputes: When customers don't recognize a transaction, they often assume it's fraud and dispute the charge. This can result in a chargeback to the merchant, which involves loss of revenue from the transaction, plus additional fees.
  • Damage to reputation: Ongoing issues with billing descriptors can harm a company's reputation. If customers continually face confusion over their billing, they may develop a negative impression of the business, leading to lost future sales.

Keep in mind the scale of this issue can vary widely. For a small business with a consistent client base, the issue might be manageable. But for a larger enterprise — especially one with a high volume of online sales or a diverse range of products or services — the problem can become substantial.

Related: How AI and Machine Learning Are Improving Fraud Detection in Fintech

Why is this a big deal?

Around 27% of the merchants surveyed in the Chargeback Field Report had no idea where their billing descriptor could be located. A shocking 47% admitted that they'd never even checked their descriptor. For the reasons we listed in the above section, this is an issue that merchants can easily amend to protect their revenue.

Merchants must keep their chargeback rate below the monthly thresholds established by Visa and Mastercard. Otherwise, they may be relegated to the higher fees and penalties associated with a "high-risk" merchant status. This is why billing descriptors are an essential part of this equation.

Many customer queries begin with cardholders unable to identify a charge on their monthly bill. Fearing fraudulent activity, they tend to contact their bank, which often leads to a chargeback despite the transaction being valid.

Ambiguous or seemingly unrelated billing descriptors are at the root of a substantial number of transaction disputes. In the same survey, one-third of cardholders responded with "Somewhat Often" or "Very Often" when asked about how frequently they encountered perplexing or unrecognizable billing descriptors. Interestingly, a small minority (only 6% of consumers) claimed they had never faced this issue.

Related: Think You Can't Win Against Chargebacks? Think Again.

Dynamic billing descriptors could be the answer

Adjusting one's billing descriptor to denote the source of each transaction clearly could save merchants a lot of time and money in the long run. This small step can profoundly impact a merchant's chargeback ratio.

Adopting dynamic billing descriptors, or otherwise adjusting to make descriptors more immediately identifiable, presents several benefits for merchants:

  • Reduction in chargebacks: A recognizable descriptor can significantly reduce the incidence of chargebacks. Customers can easily identify their purchases by providing specific information about each transaction (like the product purchased or service rendered), leading to fewer disputes and chargebacks.
  • Improved customer experience: Clear billing descriptors enhance the customer experience. Detailed transaction information can increase the customer's and merchant's transparency and trust. It eliminates confusion, ensuring customers fully understand their purchases.
  • Greater flexibility: Dynamic billing descriptors offer more flexibility. Merchants can tailor the descriptor to the specifics of each transaction, making it more descriptive and recognizable to customers. For example, each service type could have a unique descriptor for a multi-service business.
  • Enhanced brand recognition: Descriptors can also be a tool for enhancing brand recognition. By including a business name or a product-specific detail in the descriptor, merchants can make their brand more recognizable to their customers.
  • Fewer customer service queries: By providing clear and detailed transaction information, good descriptors can help reduce the volume of customer service inquiries related to unrecognized charges, freeing up resources to handle other aspects of customer service.

Examining and optimizing one's billing descriptor can be a vital strategic decision for many merchants. It can help improve operations and enhance customer satisfaction. At the same time, a bad descriptor could be a source of considerable revenue loss.

Monica Eaton

Entrepreneur Leadership Network® Contributor

Founder of Chargebacks911

Monica Eaton is the founder of Chargebacks911, the world's first chargeback mitigation and prevention service provider. Her company safeguards billions of transactions for over 1 million clients internationally with cutting-edge transaction dispute technology and management solutions.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Side Hustle

She Had Less Than $800 When She Started a Side Hustle — Then This Personal Advice From Tony Robbins Helped Her Make $45 Million

Cathryn Lavery built planner and conversation card deck company BestSelf Co. without any formal business education.

Business News

Taylor Swift Paused Her Show Over the Weekend Due to Safety Concerns. What She Said Next Is a Powerful Lesson in Leadership.

A show of concern for fans and an appreciation for the staffers who helped marked an emotional final "The Eras Tour" show in Germany this weekend.

Business News

He Bought Nvidia Stock in 1993. Now It's the Backbone of His $8.8 Billion Net Worth.

Venture capitalist Mark Stevens is Nvidia's second-largest shareholder.

Growing a Business

3 Branding Strategies That Will Make Any Brand Stand Out

Here's how to differentiate your brand in three essential steps — understanding your unique selling proposition, leveraging storytelling, and valuing feedback.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.