Chargebacks

Chargeback Process/Dispute

Consumer credit card protection for Internet purchases has become a pressing concern for online buyers. But while U.S. federal law limits a consumer's liability for unauthorized charges to $50 (US), whether the purchase was made face-to-face or on the Internet, no such protective legislation exists for merchants. This means that when there is a dispute over a charge (such as fraudulent use of a credit card by the buyer or a cardholder's winning of a dispute over whether the charge was authorized), the online merchant must pay back the amount of the original charge, plus any penalties, to the cardholder's bank. This is known as a chargeback.

A chargeback occurs when a transaction is reversed, and the amount of the transaction, previously credited to the merchant's account, is then deducted.

Not only does a merchant lose the actual inventory and the purchase price; there are also fees charged for each and every chargeback. More importantly, merchants who receive an excessive number of chargebacks can lose their merchant account.

A cardmember, or the card-issuing bank, has the right to question or dispute a transaction. In most cases, before a Chargeback is initiated, the card issuing bank request a copy of the sales record, via a "Retrieval". Once a Retrieval is received from the card issuer, your Merchant Account Provider will respond by sending a copy of the transaction, if available.

Chargeback types

1) Error Chargebacks

• Incorrect account number (ex. Most common keying error on off-line & credit)
  
• Illegible copy
  
• Expired card
  
• Duplicate processing

2) Dispute Chargeback

• Services not rendered
  
• Canceled recurring
  
• Defective merchandise
  
• Credit not processed

3) Post Transaction Chargeback

• Transaction not deposited within time frame allowed
  
• Non-receipt of copy

4) Fraud Chargeback

• Multiple transaction, same card, same amount, same merchant (ex. Failed to void)
  
• Card not present
  
• No imprint
  
• No signature

5) Authorization Related Chargeback

• No authorization
  

Suggestions to Prevent Chargebacks

Chargebacks and related fees could pose a serious threat to your business. To prevent or reduce these revenue losses, you need to take steps to reduce the risk your business takes with every order.

Take Extra Precautions When Processing Orders

Before completing a transaction, make sure the information on the sales draft is accurate, complete, and legible. Scrutinizing your orders and taking a few extra steps if anything during the sale process looks suspicious will help you minimize credit card chargebacks.

At the time of the transaction, disclose your refund and return policy. The policy should be pre-printed on sales receipts, web site and/or catalog material.

REQUIRED INFORMATION ON EVERY Mail/Phone/E-Commerce invoice/sales draft:

• The cardholder credit card number and the expiration date
  
• The name that appears on the front of the credit card
  
• The cardholder's billing address and phone number
  
• Description of merchandise and/or services rendered
  

Verify cardholders' addresses.

Address Verification Service (AVS) will verify the cardholder's billing address with the cardholder's credit card company. If you do not get an EXACT MATCH, do not proceed with the transaction.

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