What is a chargeback and how do I prevent them?

What is a chargeback?

A chargeback occurs when a cardholder contacts their bank to initiate a refund for a purchase made on their 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”).

How is it going to affect you?

There is a $25 fee for processing chargeback. In addition, merchants with excessive chargebacks over an extended period of time might be subject to fines and ultimately not being able to process card payments.

What will happen if you receive a chargeback?

Once, we receive the chargeback notification from the bank, our chargeback Specialist will contact you via email and provide you with the details of the dispute. Respond to the chargeback as quickly as possible. A limited amount of time is available to resolve a chargeback. If you delay, you may miss your opportunity to fight the chargeback.

How can a chargeback be prevented?

The best way to deal with chargebacks is to prevent them from happening in the first place. However, there are several simple steps that can be taken to minimize chargebacks.

These steps include the following:

  1. On your order confirmation page, provide the customer with the name, phone number, e-mail address, etc., of your company so that they will recognize your charge when it appears on their monthly credit card statement.
  2. Send your customers an e-mail confirmation.
  3. Have your return/refund policy clearly stated on your website. Make it a requirement that customers read the policy before their order can be completed.
  4. Provide accurate descriptions of your products on your website.
  5. International exchange rate fees assessed to the cardholder can be disputed in some cases. Carefully vetting international customers can help protect against these difficult-to-combat disputes.
  6. Verify the customer's name, address and phone number with the card-issuing bank
  7. Address Verification Service (AVS) and Card Verification Value (CVV) are optional security measures that you may request to have activated at no additional cost. It is important to note that these optional services may result in higher decline rates and the effectiveness of them varies depending on factors such as the location of your business, your average ticket amount, and average ticket count. An account manager can help you decide if AVS and CVV are right for you.
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