‘EVERY CHARGEBACK TELLS A STORY.’

 What Are Chargebacks?

In simple terms, chargebacks are disputed transactions. These are charges that customers dispute on their credit cards for different transactions. When a dispute is made, the merchant reverses the transaction and the customer receives his money back. Chargebacks are meant to protect consumers from uncertified transactions. Instead of wasting time arguing with suppliers on the rightfulness of a transaction, customers can simply initiate a chargeback transfer. The meaning of the word chargeback is fairly simple. The bank will return the charged amount to the customer without needing the merchant’s approval. Chargebacks were the direct response of the deceivers, who could use and abuse the stolen information of the credits without the cardholder being known.

THE TIME LIMIT FOR THE MERCHANT TO ISSUE A CHARGEBACK VARIES WITH THE CREDIT CARD NETWORK AND THE REASON CODE.

 How do chargebacks work and the process?

Chargebacks are initiated by cardholders, evaluated by banks, and paid for by merchants. A single chargeback, from initiation to resolution, can last months or even years. The chargeback process begins with the merchant choosing to either accept the chargeback or fight it through. The issuing bank reviews the merchant’s evidence and either reverse or upholds the chargeback.

Different Types of Chargebacks

There are three types of chargebacks- criminal fraud, friendly fraud, and merchant error. They are completely different from each other and should be handled differently. The most common one amongst all is friendly fraud with a percentage of 60%-75%. Whereby the percentage of the other two chargebacks is less. Varying from 1%-40%.

Criminal Fraud

The unauthorized transactions against the card were made by the scammer. It is none other than the customer claiming that he/she has lost the card and the transactions weren’t made by them.

Merchants are advised not to waste much time dissolving this issue. The set-off can result from various forms of criminal activity.

  • A criminal finds a lost card.
  • Physical payment card being stolen.
  • Account being hacked and information is being used to make the card not show the transaction.

Merchant error

Merchant errors occur when there is an error made by the merchant by shipping the wrong item. Disputes like these have to be solved calmly and effectively. These errors can be prevented by improvising business operations, by having easy and helpful customer services, or by having a generous refund policy.

Friendly Fraud

Few unsatisfied customers and those customers would contact the business directly with any complaints they may have. However, some consumers opt to use the bank as a middleman and file a chargeback instead of asking for a refund. While the merchant is not aware of the problems of the transactions this is also called chargeback fraud.

How chargebacks affect merchants

If you have an increase in chargebacks, the reputation of your firm might suffer. Chargebacks are expensive for merchants, who pay a heavy penalty for them in addition to losing out on the income from the transaction. The basic formula which the merchants can use to see the numbers of chargebacks that happened in a month - dividing a merchant's total number of first chargebacks for a particular month with the previous month's total number of sales transactions

Common reasons why customers file for a chargeback.

Customers are likely to claim for chargebacks are:

  • SHIPPING, QUALITY, REFUND ISSUES
  • CREDIT CARD ISSUES
  • TECHNICAL ERROR

HOW CAN CHARGEBACKS BE PREVENTED?

For the pioneers, it is necessary, to be honest with their customers. By providing them with the list of the exact information related to the product. Give them a better experience to come and share their experience with you. Good customer facilities can lead to a smaller number of chargebacks.

1. PROVIDE DETAILED INFORMATION TO THE CUSTOMER.

If you’re selling your merchandise online, make sure you provide exact images and descriptions for the products you’ve listed. Including your contact information, and your return and shipping policy will help your customers contact you in case of any complaint instead of raising a chargeback request. 

2. EMAIL THEM FOR CONFIRMATION.

While sending confirmation emails to your customers, make sure you include the invoice and shipping details of the order to avoid. In case the shipping address and the billing address are different, verify the card and customer details before initiating the sale.

3. WATCH OUT FOR THE DELICATE SUBJECT.

Keep an eye on the transactions showcasing multiple orders for expensive goods, foreign exchange, and the orders that are placed in a short time. These are often the alarming signs of fraud. Multiple orders placed with different cards to the same shipping address are marked as red flags. Do not accept an expired credit card. 

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