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Chargeback Basics You Should Know

February 14, 2013 by · Leave a Comment 

Article Submitted by:  Solid Trust Pay.

Being able to accept credit card payments is great for your business. It can increase sales and will attract more customers while giving you a competitive edge over your competitors. But along with all the benefits, credit cards also come with a degree of risk, the most important aspect which you need to be well versed on being chargebacks.

What is a chargeback?

It is when a credit card holder disputes a charge on his credit card statement with his credit card company and the amount of the transaction which had been credited for the disputed transaction having to be debited to the card holder’s account. The most common reasons for such disputes are:

  • The payment not been authorized by the card holder. This can happen when the credit card has been stolen resulting in a fraudulent transaction.
  • The card holder has ordered a product online and has not received the product. This can be a result of the card holder acting fraudulently but the result will be that the merchant will be held responsible and will be charged accordingly if he cannot prove otherwise.
  • Credit is not processed. In the event the customer has returned the product he purchased with the credit card back to the merchant due to the product not being what was ordered and requested for the payment to be refunded, but it has not been returned.
  • Technical issues resulting in the customer being charged twice for the same transaction.

The process

The chargeback process begins when a customer makes a complaint to the credit card issuing company regarding a particular charge on his card. The credit card company will refer the matter to the relevant merchant bank that will in turn refer it to the merchant who will have to provide proof to show that he did in fact provide the goods or services in question. This can be proved by providing sales receipts as evidence. If the merchant can prove that the transaction was a valid one he will not be responsible for the chargeback but in the event he is unable to so do he has to inform acceptance of the chargeback to the merchant bank and debit the customer’s account with the relevant charge.

The effect on the merchant

A chargeback involves a cost to the merchant including fees charged by the merchant bank and the considerable amount of time spent to fight the chargeback and if you cannot prove otherwise you will have to refund the money and if you have already sent the goods to the customer bear the cost of the product and shipping costs as well.

The worst is if you have a high rate of chargebacks you will be considered as a high risk merchant by the merchant banks and will face the consequences.

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