What is a chargeback?

A chargeback is a debit to a merchant’s account coming from a previous sales transaction.  In other words, a chargeback occurs when a customer tries to initiate a refund for a purchase they made on their credit card by contacting their credit card issuing bank.

What are the reasons for chargebacks?

There are many reasons for chargebacks, but the main reasons are errors made by the merchant in the submission of their credit card transactions, transactions that have not been authorized, and disputes from cardholders. 

How can I prevent chargebacks?

Regardless if the customer is right or wrong or if he/she has contacted the merchant about this situation ahead of time, it is always the responsibility of the merchant to ensure that every transaction is completed properly and that the customer is satisfied.  Therefore, the best way to handle a chargeback is to prevent it from happening at all.  The following tips can be used by most businesses in order to reduce chargeback potential. 

• Use a clear DBA (Doing Business As) name that customers can easily recognize when they review their billing statements.
• Include your telephone number on your customers’ statements so they can easily contact you in case of discrepancy. 
•  Respond to chargebacks within a time frame of about 10 business days, otherwise the ability to fight the chargeback will be automatically forfeited. 
• Never accept an expired credit card. 
• Never accept or split declined transactions into smaller amounts.  Always obtain authorization for the full amount of the sale.
• Immediately void transactions that are large or suspicious if you are unable to reach the customer to confirm that the order is legitimate. They may have purposely given you incorrect information.
• Always get signed proof of delivery.
• Charge the customer’s account at the time of shipping. 
• Clearly state your return/refund policy at your retail checkout counters and on your website.  Make sure that customers have read the policy before their order is processed.

What are the steps involved in the chargeback process?

• The customer disputes a transaction by contacting their card issuing bank
• The card issuing back then researches to determine whether the reason for the chargeback is valid.  If the chargeback is found to be invalid, it is declined and the customer is held responsible for the charge. 
• A provisional credit is provided to the customer.  The card issuing back initiates a chargeback process and receives credit from the merchant’s processing bank.
• The merchant’s processing bank then researches the validity of the chargeback.  If it is invalid, the chargeback will be declines and returned to the card issuing bank.
• The chargeback amount is removed from the merchant’s account and a written notification is provided by the merchant’s processing bank to the merchant.
• The merchant provides the documentation necessary to fix the chargeback.  If the documentation provided is proved to be satisfactory, the chargeback will be declined and the customer will be charged for the sale.  In the case that the documentation is unsatisfactory, the chargeback is successful and the process is over.  

If your questions cannot be answered by this list, please do not hesitate to contact 1 866 666 0909.  A trained technician is standing by 24 hours a day to assist you with your needs.