Merchants that process with an internet merchant account or process card not present transactions (keyed) tend to have more chargeback problems than traditional merchants that process card present transaction. Reduce your chargebacks when credit card processing online by taking extra precautions listed in this 3 part series.
During the next 3 posts I’ll define what a chargeback is and steps a merchant can take to reduce chargebacks or stop them altogether.
What is a chargeback?
A chargeback is the end result when a processor reverses a transaction and withdraws the funds from the merchant’s bank account due to the cardholder disputing the original transaction. Cardholders can dispute a transaction for many reasons such as: service or product never received, not satisfied with quality of product or service, does not recognize the merchant that charged their card or didn’t authorize them to charge their card in the first place.
When a cardholder disputes a transaction this action generates a retrieval request. The processor contacts the merchant and retrieves information specific to the transaction in question. The processor will normally ask for an invoice, proof of authorization, proof of shipping and that the cardholder actually received the product or service. On larger transactions the processor will actually call the cardholder to confirm they authorized the transaction, received the product or service, and they’re the actual cardholder. The funds in question are withdrawn from the merchant’s bank account and held by the processor until a decision has been made. If the processor rules in favor or the cardholder this results in a chargeback and the cardholder being credited for the original charge.
Taking into consideration the merchant not only loses the funds from the original transactions but is also charged additional fees for the chargeback and retrieval request it’s critical a merchant takes the proper steps to reduce chargebacks or stop them all together.
In parts 2 & 3 I’ll discuss steps a merchant can take to prevent chargebacks.