Chargeback Management & Prevention

What You Know Could Save You Money

The term "chargeback" describes the process that occurs once a customer refuses to accept responsibility for a charge on his credit card. It may also be initiated by the issuing bank due to a technical issue, such as no authorization approval code received. Chargebacks are something every business owner wants to avoid, as they can result in lost revenue. Subscribe to the Online Chargeback Management System to receive notification of your chargebacks through our online reporting tools, and respond to them electronically.

Why You May Have Received a Chargeback

There are many reasons why chargebacks happen, but these are some of the most common. Your customer:


•            Did not receive a product or service

•            Does not recognize the charge or business name on his credit card statement

•            Believes the product or service was defective, damaged or not as it was described

•            Was a victim of fraud - his credit card was stolen or used without consent


Tips for Preventing Chargebacks


The best way to prevent chargebacks is to establish best practices at the point of sale that are followed consistently by all staff. For example, always process a refund back to the original card number. Do not refund by check or cash. If credit is due on more than one sale, process each credit individually.


What You Can Expect


The chargeback process involves many players: the customer, their issuing bank, the payment brand (for example, Visa or MasterCard), the acquirer/processor and you, the merchant.

If your customer appears to have a reasonable claim, the issuing bank will make a temporary credit payment to your customer and this begins the chargeback process. Funds for the credit to the cardholder are debited from your merchant account during this process. You will receive notification of the chargeback via email, fax, physical mail. If you submit proper documentation and successfully challenge the chargeback in the necessary timeframe, the chargeback funds will be returned to you. If you do not submit documentation in time, or you are unsuccessful in challenging the chargeback, the chargeback funds will not be returned to you. 


Remember, when a cardholder does not recognize a charge they may request copy documentation to remind them and this is the dispute stage preceding a chargeback. The requested information may jog the cardholder’s memory enough to prevent the chargeback and it is vital therefore for a merchant to immediately respond to such requests and include all pieces of documentation and evidence they have to prove that the cardholder made the transaction.  The more information the merchant can provide the more likely their chances to avoid a further dispute in the form of a chargeback. 


If the copy request is due to a fraud on the part of a third party and if the merchant is offering a product or service with recurring billing, it is best that the card number be blocked to avoid future chargebacks. The merchant should still consider refunding the transaction to prevent a chargeback.