What is a chargeback?
A chargeback is a payments process where customers can contact their bank, dispute a charge on their bill or statement, and request a refund. The bank will review the transaction and most times, issue a provisional credit.
Are chargebacks becoming more common?
Chargebacks (originally meant to help consumers) are a growing concern for modern merchants. And at the rate they’re increasing, it’s no wonder why.From 2016 to 2017, chargebacks jumped 179 percent, costing merchant’s 1.9 percent of their total annual revenue. Add in the potential threat chargebacks pose to your reputation and merchant accounts, and you’ve got a pretty serious problem on your hands—no matter what line of business you’re in.
Why do consumers file chargebacks?
Typically, consumers file chargeback disputes when they don’t recognize a transaction or are somehow dissatisfied with their purchase or the buying experience. In some cases, they may simply be trying to get their product or service for free.
How do chargebacks work?
A customer can purchase something from you and later decide to dispute the charge (for any number of reasons) with their personal bank. The process triggered by this event is called a chargeback.
This process includes several parties: the consumer, the issuing bank, the merchant and the merchant’s acquiring bank.
Should I dispute chargebacks?
It’s important that merchants understand chargebacks are no longer a cost of doing business. They are a challenge that can be overcome.
Though a customer might claim a transaction was fraudulent or demand a refund, merchants very often have the evidence they need to support otherwise – and that could allow them to recover their losses and fight back. In the event a chargeback seems illegitimate, it’s important merchants fight back whenever possible. If you receive a chargeback that you believe is unfounded, you as a merchant have the right to dispute the chargeback. To do so, you’ll first need to submit a rebuttal letter to argue your case, along with a number of supporting documents and pieces of evidence.
Exactly what evidence you’ll need will depend on the exact reason code associated with your chargeback.
How long do I have to fight a chargeback?
If you plan to dispute a chargeback, it’s important to act quickly. Issuers often lag behind when notifying acquirers and merchants of chargebacks, so you may have a very small window in which to respond and every chargeback is different.
Having a chargeback representment team at your disposal can help you act swiftly and efficiently, no matter what the time frame may be.
How much do chargebacks really cost?
Chargebacks don’t just equate to the loss of a sale or merchandise. In fact, they typically mean losses of up to 2.5 times the sales price.
So, for a $100 chargeback, a merchant would pay $250 in fees, fines, customer acquisition costs and more.
Chargebacks can often threaten your cash flow and put your merchant accounts at risk, too.
They could even increase your merchant account costs or cause your accounts to be shut down, preventing you from accepting payment altogether.
Don’t Take Chargebacks Lying Down
The moral of the story is simple: don’t take chargebacks lying down.
Are you looking to stop merchant chargebacks and protect your revenues? If so, you must first take steps to understand the problem.
Download your copy of the Chargebacks 101 Guide to better help you understand the causes of chargebacks, and how the overall chargeback process works so you can fight customer chargebacks and prevent them in the first place.
