A chargeback – also called a reversal – is the return of credit card funds that were used to make a purchase to the cardholder. A chargeback occurs when a customer makes a refund request through their credit card’s issuing bank.
Most chargeback situations arise at the time the transaction is completed. Possible reasons for chargebacks include:
- Unauthorized use of a credit card (stolen card)
- Product or service not being received
- Customer dissatisfaction with a product or service
- “Friendly fraud” or the result of a consumers filing an illegitimate chargeback
Every business wants to keep their chargeback expenses to a minimum. Here are our top tips on doing so.
- When a cardholder disputes a transaction, the issuing bank may request the merchant to provide copies of receipts and other paperwork related to the sale. Always respond to these requests.
- Do not a complete a transaction if the authorization request was declined. Do not repeat authorization for payments that are declined.
- Make sure your billing descriptor is accurate. Often a customer will initiate a chargeback because the business name on the statement is unfamiliar and doesn’t match your DBA.
- Clearly communicate your contact information, as well as return, refund, cancellation and shipping policies.
- If a customer is ordering online, promptly send a receipt via email.
- Settle and deposit your sales receipts with your merchant bank in a timely manner.
- If a customer request cancellation of a recurring transaction, such as a membership or service, always respond to the request and cancel the transaction as specified by the customer.
- Be accurate and clear about your product and service to prevent any customer misunderstandings.
- Ship merchandise before depositing and transaction.
If a product or service is going to be delayed, advise the cardholder the option of a different product or service or canceling the transaction all together.