A chargeback is when a customer requests a refund on a credit card transaction through their bank. There are over a hundred official categories for chargebacks including fraud, an unrecognized transaction, products not received, a duplicate transaction, and credit not processed. Regardless of the type of chargeback, here’s what you need to do when it happens.
Figure Out the Reason for the Chargeback
When your credit card processor notifies you of a chargeback, it includes a code to explain the reason. You can find out what the code means by looking at your merchant agreement or searching online. If searching online, keep in mind that even codes from the same company may vary from country to country. Once you figure out why the client has initiated the chargeback, you can start your response.
Rules vary among processors, but in most cases, you only have 7 to 10 days to submit a dispute against a chargeback. To avoid running out of time, make sure you respond in a timely fashion. Be aware of your processor’s time frame for dispute registration, and after receiving a chargeback, put a reminder in your calendar so you don’t miss the deadline.
You may attempt to bypass the dispute process by contacting your customer or client directly. Ask they why they submitted the claim, and if possible, provide any information that may convince them to reverse the claim on their own. In some cases, while talking to the client, you may realize that they truly deserve a chargeback, and in these cases, you should refund the money or simply allow the chargeback to go forward without dispute.
To dispute a chargeback, you should gather evidence to show why the charge was valid, but the type of information you need depends on the reason for the chargeback. For example, if a customer claims they didn’t receive a product, proof of home delivery and a signature can negate that claim. Similarly, if a customer issues a chargeback for a subscription fee, proof can consist of the subscription terms to which the customer agreed. Your credit card processor should let you know what other details you need.
Some estimates claim over 70% of fraud chargebacks are submitted fraudulently or as an error. However, in spite of this fact, you may not want to pursue every dispute, even if you know your dispute is valid. If you feel like your proof is insufficient or that the dispute may not be successful, you may want to just accept the chargeback. Unfortunately, if you lose a dispute, it can affect your rating with your processor, which may result in higher rates be sure to check with your credit card processor for specific rules. Additionally, if you fear a customer may drag your name through the mud if you dispute the transaction, you may just want to accept the loss to avoid negative reviews.