It is very important to know that what actually chargeback is, for it doesn’t matter whether you are a merchant who has received his first chargeback or a consumer who is curious to know how chargebacks work.
A chargeback is a transaction reversal meant to serve as a form of consumer protection from fraudulent activity committed by both merchants and individuals. Chargebacks are not good for businesses because whenever a business owner sells a service or product online and in some cases due to some reason the consumer returns the product or service then the process of chargeback begins. Chargeback rates decide the category of your business, if the number of chargebacks is high then it will incur huge losses and the reputation of your company will be tarnished among credit card processor and payment processor.
The higher rate of chargeback means your business will consider as a high-risk business and if chargeback rates of your company are more than 1% then payment processor will not be ready to give you high risk merchant account for credit and debit card processing.
Reasons for chargebacks: There are so many reasons for chargebacks like defective goods, fraudulent transactions and many more. If you fully understand the reason of chargebacks then you will also be able to reduce chargeback. Reasons for chargebacks are as follows:
Usually, customers will demand the refund when they do not receive their product or items that they buy from your online store. To reduce these type of chargeback it is important to keep track on the good that you deliver and always keep the shipping receipts with you for any future disputes.
These are the case of fraud calls and the transaction over the phone or mail which the customers not aware of. To avoid these type of chargeback always make sure to take all the information from your customer, which are necessary?
Invalid account number and credit cards. Use technology to keep your system update and aware of an invalid credit card or able to reject any invalid or expired credit cards. When the purchase made by any expired credit card then the chargeback occurs.
The time limit to file a chargeback is between 60 to 120 days from the time of the original purchase. Then the merchant has 45 days after receiving a chargeback to dispute the chargeback. There are different rules for different credit card companies and all the rules are set by them only. The entire lifecycle is going like as follows:
After that, there are two possibilities. One possibility is whether the merchant banks found the request invalid and then they inform the customer’s bank about it, which happens in rare cases only.
Another possibility is that the merchant’s bank found the request valid then the merchant will be asked to proof themselves right if the merchant will be able to provide the valid and full documents then the chargeback will be removed from the records and the cardholder’s bank remove the refunded money from the customer’s account. Otherwise, if the merchant will not be able to prove himself or herself right then the funds are removed from merchant’s bank and a chargeback will also remain in the records additionally the merchant also pay some additional fees.
There are the rules made by the payment processing network so the best way to prevent chargebacks is to adhere the policies and guidelines made by them which are actually to protect you only.
Give us a call at+44 800 776 5988 or get in touch with us through our website. Even if you’re not a customer of ours, we want to help you understand the process so you can make the best decisions for your business. We believe transparency and proactive education is the best policy.