Everything You Need to Know About Chargebacks

Everything You Need to Know About Chargebacks

Disputes are relatively common during transactions, forcing customers to ask for refunds. This refund is referred to as a chargeback, and it is a payment returned to your credit or debit card. It only occurs if the cardholder complains to the issuing bank, prompting transaction reversal and fines. Understanding what are chargebacks, how they work, and how to prevent it will help. Here are some insights.

How Chargebacks Work

The chargeback process is straightforward. This process involves multiple players and aspects, which could take several weeks to complete. In addition, the chargeback can arise at any time, including weeks or months after the actual sale.

This process starts once the cardholder files a chargeback with the card issuer. In this case, the cardholder will request the bank to issue a refund for goods purchased from you. The bank will review the complaint and assign it a code. This review preludes the investigation phase, where the bank will establish whether the case is warranted. The acquirer is also notified.

Once the acquirer receives and reviews the chargeback, it gets passed to the merchant. The merchant will review and accept the chargeback if it is legitimate. However, suppose the merchant’s bank refutes the claim. In this case, any money removed during a chargeback will be returned to the merchant.

When Do Chargebacks Suffice?

Various reasons could force a chargeback. You can file for this chargeback in specific circumstances, including when the product is not delivered, fraudulent instances, damaged or defective products.

Further, a chargeback could suffice if the cardholder reports it was stolen or lost. In this case, the cardholder will talk to the merchant before reaching out to the bank. This move will help resolve or understand issues before escalating them. However, cardholders are advised to report stolen or lost cards instantly. This move will cushion them against further losses in the long run.

Talking to the merchant before filing a chargeback is a wise move. Sometimes, the merchant might have made an innocent mistake. In this case, they would be willing to rectify it instead of having it reported. Besides, it makes the entire process much more seamless. You are likely to get back your money within a significantly shorter period.

How to Prevent Chargebacks

Chargeback prevention is essential, mainly if you, the merchant, are innocent. This process requires you to provide various details. For instance, it would be wise to describe the item comprehensively, avoiding any misleading information. You will also need to indicate the exact or approximate delivery time, contact information, and the final price at checkout.

You also need to be polite to your customers, responding to their issues on time. Such will be the time to provide detailed refund policy information. Collecting signatures during delivery will also be essential in cushioning you against chargebacks. Above all, invest in excellent fraud prevention tools.

Chargebacks could expose your business to considerable losses in the long run. Understanding how they operate will help you take preventative measures. The information above will help you in this regard.

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