Every business that deals with credit card transactions will eventually have to deal with chargebacks. A chargeback occurs when a consumer claims that they don’t agree with a charge that was made to their bank account, line of credit or credit card. The consumer will contact their financial institution, and the financial institution will many times forcibly initiated the reversal to get the consumer back their money.
Chargebacks were created as an easy way for consumers to protect themselves from unscrupulous merchants. Unfortunately, the ease of this process has led to unscrupulous consumers who have taken advantage of the privilege. Although most consumers are fair and honest, just as most merchants are, every business that accepts card payments will have their own share of chargebacks. Sometimes a chargeback claim is valid and may be the cause of something as simple as a clerical error. These kind of chargebacks are the reason that the whole consumer protection act was created. For illegitimate chargeback claims, a business will want to take all of the measures that they can to limit and protect themselves.
Remember, a consumer needs a valid reason to file a chargeback claim. They must provide their credit card issuer with one of the four valid reasons or else their chargeback claim will be denied. The four valid chargeback reasons are either technical reason chargebacks, clerical chargebacks, quality related chargebacks or fraud chargebacks. A technical reason will usually relate to an issue that involves a bank processing error or an expired card. Clerical reasons can be duplicate billing errors or an error in the amount charged. Quality chargebacks are when a consumer never receives the product that they purchased or they receive a defected product. Lastly, the most common claim, is fraud related chargebacks. These occur when a consumer claims that they have been a victim of identity theft or when they never authorized a payment.
The best way for an online merchant to fight a chargeback is to maintain proof of all orders. Without proof of an authorization, a consumer can easily get their chargeback honored uncontested. Any digital proof that you have that shows that the consumer made the authorization will highly favor your business. If the consumer initially gets their chargeback honored, you can still get the process reversed. During the retrieval period, an investigation will still go on, and by providing your digital proof of the authorization, you stand a great chance of getting the chargeback reversed. Remember, proof is everything.
Brick-and-mortar stores have an advantage over online merchants because they require their customers to swipe their cards. Physical signatures that a customer signs is good proof that the transfer was authorized. Also, physical stores will ask the customer for their identification when using a credit card. To protect yourself with telephone orders, always compare the telephone number that the consumer is calling from to the number on their credit card. Sure, they may be using a different phone, but it is an advisable security measure.
Chargebacks will happen and you will lose some. It is part of doing business. The best practice to limit chargebacks is to give your customers great customer service. Credit card Chargebacks are usually done by consumers as a last measure to get their money back. Happy customers will usually want to consult with you before having to contact their bank.