CREDIT CARD CHARGEBACKS 101: E-COMMERCE TECHNOLOGY

Getting paid via credit and debit cards is a great opportunity for merchants to grow their business, but it features some added responsibilities. Cardholders can dispute a transaction or deal up to 4 months after item purchase. This kind of dispute is termed a “chargeback.”

The term “chargebacks” applies to the process that takes place after a customer or buyer refuses to acknowledge the responsibility for a charge on his or her credit card or does not admit a credit or debit card purchase. This can be initiated by the issuing financial institution as a result of a technical concern, like no authorization approval code received. Chargebacks are something every entrepreneur wants to avert, as they can bring about loss.

The Reason Why You May Have Received a Chargeback

There are lots of logical reasons why chargebacks occur. Some of the most prevalent are when a customer:

Did not receive a product or service purchased.

Believes the service or product was damaged, defective or not as described.

Does not recognize the charge or business name on his credit card statement.

Was a victim of fraud—the credit card was used without consent or permission or even stolen.

What to Expect

The chargeback process involves several key players:

• The customer
• Issuing bank
• The payment brand (for instance Visa, MasterCard or America Express)
• The acquirer/processor (such as Charge.com, ACE Merchant Processing, Chase Paymentech, etc.)
• The merchant

If a customer claim is reasonable, the issuing bank is going to make a temporary credit payment to the customer and begins the chargeback process. Funds for the credit to the cardholder (customer) are debited from your merchant processing account during this process.

Ways to Prevent Chargebacks

Even though chargebacks are costly and unpleasant, they can be averted. The simplest way to prevent chargebacks is always to cultivate ideal practices or measures at the point of sale (P.O.S), which are implemented routinely by all personnel. For instance:

• At all times process a refund to the actual card number.
• Never refund by cash or check.
• If credit is due on multiple transactions, process each credit independently.
• Use a reliable merchant processing company.
• Have an effective chargeback management system. 

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