Know The Difference
Chargebacks and Refunds are often used interchangeably to define situations in which disgruntled customers want to reverse their purchases and want their money back. As a merchant, be it high risk merchant or low risk merchant, you lose the sales, either way. Perhaps this is why these return policies are so often mistaken.
Even though chargebacks and refunds share a lot in common, there are still major differences between the two. As a retailer, it’s imperative that you know how they serve and most importantly what measures can be taken to reduce the recurrence.
Let’s have a look at how Retail Refunds work.
Although most of us are familiar with refunds i.e., goods are returned which is initiated by the customer and agreed by the merchant. There are several reasons why a customer might request a refund which also includes:
- Damaged goods
- Poor quality
- Wrong merchandise
- Late delivery
As the merchant, it is your part to decide whether or not to refuse the consumer’s reason. If you accept, it’s simply a matter of charging that user’s account or returning the money.
Let’s compare how do Retail Chargebacks work.
Similar to refunds, chargebacks are also initiated by the consumer. However, in this situation instead of contacting the merchant or you directly, the consumer rather goes through their card-issuing bank to oppose the charges. The bank then credits the users’ accounts before coming after you i.e., the merchant.
Just as with traditional refunds, there are any number of legitimate reasons for triggering a chargeback — including damaged, late or poor-quality merchandise. Another common trigger is when customers don’t recognize certain charges on their credit card statements.
There are various ways a consumer can initiate a chargeback. To initiate a chargeback eventually leading to a fraud. Here the consumer only needs to call their banks or click the “dispute” button associated with their online accounts. This type of fraud is especially common online also known as “Cyber Shoplifting” where e-merchants process card-not-present transactions from anonymous shoppers. Chargeback fraud is far more expensive than refunds. Not only does the merchant lose the original purchase amount, but they also must deal with weeks (if not months) of to-and-fro communication with the consumer’s card-issuing bank.
Disgruntled consumers will eventually get their money back no matter what may be the situation. Perhaps, it’s in the merchant’s i.e., your best interest to guide them toward your own well-organised and hassle-free refund policy instead of the much more costly and time-consuming chargeback option.
Want more tips for preventing frauds, refunds or chargebacks within your store? Schedule a free consultation today.