What are Chargebacks and How to Deal With Them?

What are Chargebacks?

A chargeback is simply a disputed transaction. It happens when a credit card holder contacts their issuing bank and asks for a refund. Most customers view a chargeback as a last resort in the case of a dispute that they can’t resolve directly with a merchant.

They instead contact the issuing bank to get back their money forcibly. When a customer disputes a certain transaction, the card issuer reverses that transaction, and the consumer gets back his/her money. Initially, chargebacks were created to ensure that customers do not have to pay for unauthorized transactions.

However, some fraudulent consumers take advantage of chargebacks to defraud businesses, which may an unfortunate and costly affair to a normal business owner. The customer goes to a business, buys an item, and since he/she did not want to pay for it in the first place, he/she issues a chargeback.

What are the Common Reasons for Chargebacks

• Defective items or items were not delivered
• Unauthorized transactions
• Incorrect billing on the items
• Duplicate processing

How to Deal With a Chargeback

If you’re looking for ways on how to prevent credit card chargebacks, the best way is listening to your customers and resolving everything without getting the card company involved. Regardless of whether you offer a refund or an item exchange, handling the problem yourself can prevent a costly chargeback.

If you receive a chargeback notification, there are essential steps you should follow to give you a better chance of winning the dispute. The most vital protection against a chargeback is a receipt bearing the customer’s signature. This will be critical when trying to prove that you had a right to charge that credit card. If you shipped the item, then you may be needed to provide additional information.

If the consumer used the mail or phone to make the order, an invoice or bill of sale might be necessary. To protect yourself further, get the tracking number and history from the shipping company you used. This helps if the consumer says that the product was not delivered.

After receiving the chargeback notification, you should respond in the earliest time possible. By losing the dispute, you risk incurring costly chargeback costs and losing your merchandise. Respond within the specified time and be armed with receipts, invoice, tracking information and any documents that can prove the legitimacy of the transaction.

Once you have done all this, the card issuer will evaluate everything and determine if the transaction was legitimate. If the issuer rules in your favor then the money will be returned to you. If they rule against you, it’ll be credited back to the cardholder. In either case, you’ll get written notification of the outcome.

One final thing you need to keep in mind is that if you receive multiple chargebacks from one customer, don’t mix them up altogether. Each chargeback should be answered separately and with all the relevant documents. Don’t take shortcuts; they will cost you. The issuer won’t spend their time separating the documents applying in each case. Take your time and ensure everything is in order.