Chargebacks. What are they? And how to get through them.
If you are a business owner who accepts card payments, then more than likely, you are familiar with a little headache known as ‘chargebacks.’ If the business realm is new to you, then you may not yet have been acquainted with the term. Let us explain. A chargeback occurs when a customer reaches out to their issuing card bank to dispute a charge posted on their statement, instead of initiating the process through you. If your business accepts debit and/or credit cards as a form of payment, then you are susceptible to experiencing a dispute like this at some point.
Resolving a chargeback can be an arduous process. It can take between 45-90 days (and sometimes more). Documentation and correspondence are needed between all parties involved; the cardholder, issuing bank, card network, and you. If fraud is involved, then the process will invite additional parties to the correspondence. Fees can also be incurred regardless if you win or lose, even if the dispute is later canceled.
There is no way to completely prevent chargebacks from happening or even reduce the amount of time it takes to resolve one. However, our team at Chesapeake Payment Systems are experts that can help you navigate this process and even reduce the number of chargebacks that you have to deal with. Check out these tips below.
Preventing and Reducing Chargebacks
- Let your customer know that if they experience an issue, you’d like the chance to first ‘make things right.’ Then guide them to come to you directly. If the customer goes to their issuing bank first, a chargeback will be issued, and the process will begin. Even if you would have corrected the issue had you known about it beforehand. Posting signage that clearly defines your dispute policies will help, too.
- Clear up transaction confusion: Sometimes, a customer may not recognize the name of the transaction when it comes through on their statement. Talk to your provider to see if there is a better way to identify your transactions so that there is no confusion about the charges.
- If you need to offer a refund to a customer, do it promptly. Delaying a refund can mean missing a resolution deadline altogether. When this happens, the customer may feel forced to dispute the transaction with their financial institution instead, which will initiate the chargeback process.
- When handling transactions ALWAYS follow these best practices:
- Check the ID of the customer.
- Enter the CVV, address information including the zip code, manually if needed.
- Keep all signed sales receipts to reduce fraudulent claims.
Settling a chargeback
- Don’t wait to respond in correspondence. You will get an advice letter issued by the processor that will outline the timeline for your response. These timelines may vary with each dispute, so it is important to pay attention to the deadlines in the letter. Sometimes other correspondence will also limit the number of days that you have to respond. It’s plain and simple. The sooner you reply, the sooner the dispute claim can move on to the next step. If you miss the window that can create additional complications.
- You can dispute the chargeback. If you have followed the best practice recommendations for handling a transaction, (see prevention step 4 above) and have the proper documentation to prove it, then yes, you can dispute the chargeback and even win.
- Once the chargeback process has begun, do not decide to provide a refund before the decision is made. Earlier we suggested providing the refund as soon as possible. This was BEFORE the transaction was disputed. However, if the customer wins the dispute, the transaction is automatically refunded. So if you offer the refund after the chargeback process has begun, then you could be out twice as much money when it’s said and done.
- It is important that you follow Card Brand rules regarding chargeback prevention and settlement. Contact your processing provider or Chesapeake Payment Systems for advice if needed.
If you are a Chesapeake Payment Systems customer, know that we are committed to your success and well-being. We are well-versed in this area and are here to help with any of your needs. If you have questions, please don’t hesitate to call us at 866-941-1335.
*Note: card brand refers to VISA, MasterCard, Discover, American Express, etc.