A chargeback is a transaction that a card issuer returns to a merchant back – and most often, to the merchant – as a financial liability. In essence, it reverses a sale transaction, as follows:
ㆍThe card issuing bank subtracts the transaction dollar amount of the transaction.
ㆍThe merchant’s bank debits the merchant’s bank for the dollar amount of the transaction.
For merchant’s chargebacks can be costly. Merchants can lose both the dollar amount of the transaction being charged back and the related merchandise. Merchants may also incur other internal costs for processing the chargeback. Excessive chargebacks may result in termination of the merchant processing account.
It is important to limit chargebacks. Encourage your customers to contact you first with complaints, and attempt to resolve those complaints.
The most common reasons for chargebacks and how to resolve them are as follows:
NON-RECEIPT OF REQUESTED RETRIEVAL ITEM
ㆍ If the merchant does not supply the requested sales draft, it will result in a debit to the merchant’s checking account. This chargeback cannot be reversed.
UNAUTHORISED MAIL ORDER/TELEPHONE ORDER TRANSACTION
ㆍ This chargeback is initiated when the cardholder denies that they authorized a sale by mail or telephone. A merchant takes these types of orders at their own risk and would be responsible for supplying a facsimile draft as proof that the order was actually placed. Because there are no signatures involved in these types of transactions, the merchant should keep all records of shipping to assist Card and beyond in proving the cardholder initiated the transaction.
ㆍ This chargeback is initiated when a cardholder is charged two or more times for a transaction authorized only once. This chargeback may be reversed if the merchant can supply proof of more than one signed and authorized sales draft, each having different invoice numbers.
NON-RECEIPT OF MERCHANDISE
ㆍ The cardholder states that they authorized the sale and were billed for the item but never received the merchandise. This chargeback can be reversed if the merchant can supply proof of a shipping receipt that has been signed by the cardholder.
MISSING SIGNATURE/MISSING IMPRINT
ㆍ If a sales draft is missing a signature or card imprint, the issuing bank has a right to charge back this item. It is the responsibility of the merchant to ensure the cardholder signs all sales drafts or terminal slips, and that any draft is imprinted (unless the card was swiped) with the credit card number. The signature should be checked against the signature on the back panel of the card. Every hand-keyed transaction requires an imprint of the card.
If Card and beyond feels that the chargeback is valid, the merchant’s checking account will be debited for the amount of the sale. A Chargeback Adjustment Advice along with any documentation that would verify the dispute would be mailed to the merchant the same day the debit is processed.