What is a chargeback?
A chargeback occurs when a credit cardholder contacts their credit card-issuing bank to initiate a refund for a purchase made on their credit card. Chargebacks arise for a variety of reasons but generally they are the result of a cardholder changing their mind, being dissatisfied with their purchase or a case of fraud. The fraud can result from the unauthorized use of their credit card (stolen card) or the cardholder purposely seeking to dispute a legitimate purchase they made (“friendly fraud”). Merchants not only incur losses due to non payment of services rendered or goods delivered, but also face additional burdens caused by chargebacks. Most card issuing banks assess an administration fee to the merchant for processing the chargeback ranging from $25 to $100 per occurrence. In addition, the card associations can get involved when merchants are hit with excessive chargebacks over an extended period of time. If these merchants continue to experience high loss rates, the associations
In the credit card world, an authorized transaction can be reversed. This may happen, for example, when a fraudulent transaction has been charged against a customer’s account, and the customer disputes the transaction. To avoid chargebacks, many merchants perform checks before accepting a transaction and refuse to accept it if suspicious. Sometimes blocked transactions are actually legitimate, and so this practice has the negative effect of preventing valid customers from completing their purchase. This type of chargeback does not occur with Interac Online. The financial institution authorizes each payment, and guarantees payment to the merchant.
The process that returns the funds to the shopper’s card issuer – when the shopper has successfully disputed a payment – is known as a ‘chargeback.’ There are many reasons why chargebacks can happen under the Card Scheme regulations. These regulations are set by Visa, MasterCard, and JCB. A disputed payment occurs whenever a card holder questions any goods or services you provide, and the card holder takes their dispute to the card issuer. When a shopper or card holder disputes a payment made at your website, we use a standard card scheme disputes procedure to resolve the dispute (which involves the card holder, the card-issuer, and you). At WorldPay we are not directly involved in the dispute, but provide the Disputes Management page that enables you to manage and work on chargebacks and disputed payments. The card issuer interprets the card scheme rules to decide whether you will receive the disputed payment, or if the amount will be returned to the cardholder’s account. A Chargeback
A chargeback is when a customer disputes a charge on their statement by contacting the credit card company instead of contacting you. If a customer does not recognize the charge on their statement, or if they believe the amount was wrong, they may call their credit card company and ask them to investigate. Thus begins the chargeback. To be quite frank, chargebacks suck. The merchant bank will charge you a fee for the retrieval of information, and if it is determined that the customer is right, there will be another fee for the chargeback itself. The customer will be refunded their money directly through the credit card company instead of through you. The merchant bank will keep track of the amount of chargebacks on your account, and if there are too many, you will be in jeopardy of losing your account. When dealing with internet transactions, unfortunately the card companies will usually charge back first and ask questions later. The more you do to protect yourself against chargebacks,
A chargeback occurs when the cardholder disputes a charge that was made through your merchant account. If this happens, you will receive a chargeback notification from your merchant account provider (Merchant Focus if you signed up through us). It is extremely important to respond to the notification as soon as possible, as the default judgement is in favor of the cardholder if the merchant does not respond. The card issuing bank is responsible for the chargeback investigation, and they will decide whether or not to reverse the charge based on the claims of the cardholder and the merchant’s response. You are responsible for the chargeback fee regardless of the outcome of the dispute.
