Understanding Chargebacks
A chargeback occurs when the funds paid into your merchant account are reversed. The funds are then refunded to the cardholder, as a result of disputing the original charge.
A disputed claim from a customer is usually for the following reasons:
- Customer never received what they ordered
- Received goods or service unsatisfactory
- Fraudulent use of customers credit card
Cardholders are given two months from the date of the transaction to make a claim for a chargeback. In addition to the reversal, the merchant is typically charged a service fee of $20 to $50 per chargeback. The bank will often issue the chargeback even before notifying you of the claim. Unmerited "disputes" are common and most instances are settled in favor of the cardholder.
Merchant account chargeback’s can cost merchants significant amounts - and if they occur too frequently can actually jeopardize one's merchant account.
- Be sure to utilize the address verification system (AVS) which compares the billing address submitted by the cardholder with the card issuer's records. The AVS service is free with some merchant accounts; with others there is a small additional fee.
- When accepting manually input for an order, review the customer's data for anything suspicious. Be especially leery of orders from developing countries such as Indonesia, Russia and other eastern block nations - they statistically have shown a higher than normal number of fraudulent transactions.
- When the customer's shipping address and the credit card billing address do not match, you may want to contact the customer to ask him to explain the difference
- Don't complete a transaction if an authorization request is declined. No matter how frequent or familiar the customer is to your business, never complete a declined authorization.
Have any questions, contact our in-house Chargeback Department Call (866) 477-8088 |
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