A chargeback occurs when a consumer successfully disputes an item on their account statement or transactions report. Chargebacks came into effect to protect consumers from merchant frauds but now it has been widely used to plan a scam. As chargeback costs as much as twice the transaction amount and loss in business reputation, they must be handled skillfully. This article will take you through the process of resolving a chargeback.
Why Chargebacks Are Bad For Your Business?
A chargeback can cost more than the actual amount of the transaction. When fees and other charges are taken into account, chargebacks can result in a revenue loss of up to twice the transaction amount. They also raise the chargeback ratio for the merchant, which might have major ramifications.
If a merchant’s chargeback ratio surpasses certain levels set by the card networks and other financial institutions with which they do business, they may be subject to fines, additional chargeback costs, and even account termination. The most commonly used threshold is 1%.
Review The Chargeback
Chargebacks can make a huge impact on the business, that’s why it is important to review and take decisions according to the chargeback situation. Sometimes chargeback can happen because of your mistake.
A chargeback can also be potential fraud. Fraud with chargeback as an instrument is a major issue. It’s important to remember, though, that not all chargeback fraud is “friendly.” For a variety of reasons, consumers purposefully abuse the chargeback process:
- The cardholder wants to return something but doesn’t want to pay a restocking or handling fee.
- “Buyer’s remorse” strikes the cardholder.
- The return process is overly slow or inconvenient for the cardholder.
- The cardholder delayed too long, and the time limit for returning the item had expired.
- The charge was made by a family member, but the cardholder refuses to pay the bill.
- The cardholder is looking for a freebie.
Process To Resolve Chargeback
In most circumstances, merchants are responsible for chargebacks and have the burden of evidence in any disagreement. A merchant must make a compelling justification for reversing a chargeback. If the merchant does nothing, the cardholder wins by default.
If a chargeback appears to be illegitimate, retailers should fight back as soon as feasible through representation. Even if a client claims that a transaction was fraudulent, merchants frequently have the documentation they need to prove otherwise, allowing them to recoup their losses.
If you receive an erroneous chargeback have the opportunity to fight the chargeback. For fighting an erroneous chargeback, you’ll need to send a rebuttal letter, as well as a number of supporting documents and pieces of proof, to prove their case. The type of evidence they’ll require will be determined by the chargeback’s reason code.
You will need the following documents to fight Chargebacks:
- Proof of delivery in the form of a tracking number, shipping receipt etc.
- Receipt of sales or transaction.
- Getting the bill-to and ship-to addresses to match.
- Delivery proof in the form of a delivery receipt from a shipping provider, a confirmation email etc.
- Any proof of conversation with the consumer, as well as any additional proof that you completed the transaction.
You will need to work with your sales department and/or chargeback management company to create a dispute package that will lay out the evidence and will try to persuade the issuing bank according to the bank’s policies.
After this, an acquiring bank will send the information back to the issuing bank via the credit card network, which makes a decision and notifies both parties involved.
It’s critical to move promptly if you want to contest a chargeback. Chargeback notifications from issuers to acquirers and merchants are frequently delayed, so you may only have a little time to reply. Having a chargeback representation staff at your disposal can assist you in acting quickly and efficiently, regardless of the deadline.
How To Prevent Chargeback Fraud in Future?
You must thoroughly check and review orders to prevent future chargeback frauds. You must take the following step to avoid chargeback fraud and losses.
Stay away from high-risk orders – High-risk orders are the orders, with either unusual details or unusual high order value. If a customer places an order with unusual order details like a mismatch in shipping and billing orders, or several attempts while making payments then contact the customer and confirm the order details. If they fail to verify their order details, you have all the right to cancel the order.
Save order details and proves – You must always conserve all the details of the order even after the order have successfully shipped. This could save you from a lot of chaos in a possible chargeback situation. Having solid evidence of your innocence can save you from losing your hard-earned money.
Define refund and return policy – You must clearly define your return and refund policy so at any given point customer opens chargeback or asks for an unreasonable return/refund, you are all prepared with the policy to take further decisions in accordance with your policy.
Chargebacks are nightmares for businesses. Very few of the people who open a chargeback are genuine and the rest of them are just over-smart people trying their luck making easy money with scamming. You must be extremely careful while dealing with chargebacks as it might result in a hefty loss of your business.