When one of your customers makes a credit or debit card purchase, the transaction doesn’t end there. Once the initial card-authorisation process is complete, the transaction goes through settlement, in which the funds from the sale are captured and deposited into your bank account. On the customer end, card transactions appear as line items on credit and debit card statements. These line items can include billing descriptors.

Billing descriptors can prevent chargebacks by helping customers recognise line items on their statements. Here’s a detailed explanation about what billing descriptors are, how they appear to customers, and how you can use billing descriptors to reduce chargebacks.

What's in this article?

• What is a billing descriptor?
  
• Types of billing descriptors
  
  • Soft descriptors
    
  • Hard descriptors
    
  • Static descriptors
    
  • Dynamic descriptors
    
• How billing descriptors appear to customers
  
• Billing descriptors vs payment references
  
• How billing descriptors can help prevent chargebacks
  
• Tips for writing billing descriptors
  

What is a billing descriptor?

A billing descriptor is identifying text that appears on a customer’s credit or debit card statement. It contains information about a transaction and the business associated with the charge. Your business information appears on your customers’ credit or debit card statements alongside other charges made during the billing period.

Businesses usually create billing descriptors when they open their merchant accounts, and billing descriptions typically remain the same for every transaction – or at least every transaction of the same type. Individual transactions are denoted by payment reference numbers, which appear alongside the billing descriptor on the card statement.

Types of billing descriptors

Billing descriptors fall into one of two categories – soft or hard – and are classified as either static or dynamic.

• Soft descriptors
  Soft descriptors note pending transactions. These temporary descriptors appear on a cardholder’s online-transaction log as soon as the issuer authorises the charge and are typically replaced with a permanent descriptor after the transaction has been settled.

• Hard descriptors
  This is the permanent billing descriptor that will replace the soft descriptor on the cardholder’s statement, once a transaction has been settled. It usually takes a few days to appear on the statement, alongside the final amount charged.

• Static descriptors
  Generally, these descriptors only include the name of the business and are an appropriate option if your business offers a single product or service. For example, if you run a SaaS company that only offers one CRM software product, a static billing descriptor is probably enough to help your customers recognise charges from your company on their card statements.

• Dynamic descriptors
  Dynamic descriptors allow more detail to be included in the billing descriptor. Dynamic descriptors typically include this information:

  • The company name, shortened to three letters and followed by an asterisk
    
  • A short description of the product or service provided
    
  • The company’s phone number
    

A business can choose to include some or all of these details, depending on its priorities and how much space is available. Dynamic descriptors are usually capped at a maximum of 20–25 characters. We’ll dive deeper into how to write the most effective billing descriptor for your business a little further down.

How billing descriptors appear to customers

Billing descriptors show up on card statements first as soft descriptors and later as hard descriptors. Soft descriptors appear immediately after the cardholder’s issuing bank has authorised the transaction, and they are often noted as a pending transaction. Hard descriptors replace soft descriptors once the transaction has been settled, which usually takes a few days.

The soft descriptor might accompany an authorised payment amount that is different from the final amount charged, but the hard descriptor will always be posted alongside the final amount. For example, if a hotel places a temporary hold on a credit card to cover incidental expenses during a guest’s stay, that charge might have one billing descriptor, and the final charge upon checkout might have a different billing descriptor.

For more information, read our article on the card-payment authorisation, capture and settlement process.

Billing descriptors vs. payment references

A payment reference number is a unique set of numbers and letters that identifies a transaction. Payment references are used for more than just card payments: Bank transfers also have payment references. Unlike billing descriptors, which ideally should be made up of recognisable words and numbers, payment references are combinations of random numbers and letters.

Payment references aren’t useful in the same way as billing descriptors. If a customer looks at their account statement and notes the payment reference, that information will not tell them what they purchased or which business they purchased from. That’s the purpose of the billing descriptor. But customers can use payment references when communicating with their bank about a specific transaction.

Between billing descriptors and payment references, customers have the information that they need to recognise a transaction and contact their issuing bank about it.

How billing descriptors can help prevent chargebacks

Billing descriptors are a powerful tool that businesses can use to prevent chargebacks. A chargeback is a reversal of funds following a debit or credit card purchase. Chargebacks are initiated when the customer files a dispute over the charge with their bank or credit card provider.

One of the most common situations that prompts customers to request a chargeback is when they don’t recognise a charge on their card statement. Using a billing descriptor that clearly states the name of your business will help minimise the number of chargebacks that your customers request.

But strong billing descriptors won’t eliminate all chargebacks for your business. There are many other reasons why chargebacks happen and plenty of steps that you can take to prevent them. Using clear billing descriptors is an easy, effective solution.

Tips for writing billing descriptors

Although billing descriptors are short pieces of text, there are guidelines to consider before creating them. Here are a few guiding principles to help you create the best billing descriptor for your business:

• Keep it simple
  No matter what you include in your billing descriptor, use clear, straightforward language. Writing successful billing descriptors means including as much detail as possible, with the fewest number of words and characters.

• Use the business name people know
  Many businesses have an official name under which their company is registered, as well as a more recognisable, customer-facing name. When writing your billing descriptor, include the business name that your customers will recognise. For example, if your company is registered as "Wax Creations, LLC", but you run a candle shop called "Creative Candles", you should use "Creative Candles" in your billing descriptor.

• Include your website, if relevant
  If you have an e-commerce business, and customers are more likely to recognise your website name than the name of your business, use the website name in your billing descriptor.

• Include your phone number
  If your business has a customer service phone number that is regularly staffed and easy to reach, include it in your billing descriptor to decrease the chances of chargebacks. But consider this only if you’ve invested in reliable customer service or it could backfire. Don’t risk adding a negative customer service experience on top of the original issue.

Billing descriptors may appear insignificant at first glance, but they enable businesses to foster trust and enhance the customer experience. By optimising these concise descriptors, companies can reduce chargebacks, improve brand recognition and create a simple transaction experience. Using billing descriptors can lead to significant benefits and long-lasting customer relationships, contributing to a business’s overall success.