Credit Card Chargebacks 101: eCommerce Technology

Getting paid via credit and debit cards are a great opportunity for merchants to grow their business, but it features some added responsibilities. Cardholders can dispute a transaction or deal up to 4 months after item purchase. This kind of dispute is termed a “chargeback.”

The term “chargeback” applies to the process that takes place after a customer or buyer refuses to acknowledge the responsibility for a charge on his or her credit card or does not admit a credit or debit card purchase. This can be initiated by the issuing financial institution as a result of a technical concern like no authorization approval code received. Chargebacks are something every entrepreneur wants to avert, as they can bring about loss.

The Reason Why You May Have Received a Chargeback

There are lots of logical reasons why chargebacks occur. Some of the most prevalent is when a customer:

• Did not receive a product or service purchased.
• Believes the service or product was damaged, defective or not as described.
• Does not recognize the charge or business name on his credit card statement.
• Was a victim of fraud—the credit card was used without consent or permission or even stolen.

What to Expect

The chargeback process involves several key players:

• The customer
• Issuing bank
• The payment brand (for instance Visa, MasterCard or America Express)
• The acquirer/processor (such as Charge.com, ACE Merchant Processing, Chase Paymentech, etc.)
• The merchant

If a customer claim is reasonable, the issuing bank is going to make a temporary credit payment to the customer and begins the chargeback process. Funds for the credit to the cardholder (customer) are debited from your merchant processing account during this process.

Ways to Prevent Chargebacks

Even though chargebacks are costly and unpleasant, they can be averted. The simplest way to prevent chargebacks is always to cultivate ideal practices or measures at the point of sale (P.O.S), which are implemented routinely by all personnel. For instance:

• At all times process a refund to the actual card number.
• Never refund by cash or check.
• If credit is due on multiple transactions, process each credit independently.
• Use a reliable merchant processing company.
• Have an effective chargeback management system.

Defending your Business against Chargebacks

When an issuing bank reverses a customer’s transaction due to disputing the charge, you need to effectively challenge the reversal or end up losing the sales proceeds, including any shipping and delivery expenses, and having a chargeback fee levied against you (normally between 25 to 50 dollars per chargeback).

For this reason, you need an effective chargeback management system to help you effectively manage chargeback issues. Your chargeback management system should make use of a variety of checks for chargeback prevention, chargeback fraud, and chargeback abuse.

It is also vital for merchants to have correct and comprehensive data on customer bankcard transactions.

Resources of Chargeback Representment and Prevent Chargebacks

High-Risk Merchant or Low Risk, even Point of Sales receive chargebacks and they are unavoidable sometimes. We always recommend a strong response with the required documents based on the chargeback reason codes. Our Chargeback Analysts work with our merchants to receive, process and respond to the chargebacks REAL TIME.

Tips to Make Effective Chargeback Representment

Essentially, first steps to effective chargeback representment to research the reason code and explain the reason for chargeback

Collect Evidence Quickly– You can collect your evidence quickly and build successful case with minimum time delay

Need to Understand Rules–  For win chargeback Representment you have to understand how chargeback representment process works?

Evidence Compelling– For Success, Chargeback Representment depends on your evidence proof

Know the Reason codes– Read and understand the Reason code description accordingly, Evidence you have provided by chargeback Reason

Understand Your Customers – Track and analyze the customer’s transaction history and behaviors, able to quickly identify high risk areas for high risk transactions and chargeback fraud.

Billing Data– when chargeback occurred while customer does not recognize credit card charge, you can use System that supports your company name, phone number for easy contact.

Know Your Chargeback Ratio– you need to understand how and why chargebacks are happening? it will improve the customer communication internal process and website content to prevent future chargebacks.

To Deal The Credit Card Chargebacks: Understanding The Pre-Arbitration Process

Chargeback Prevention is actually a quite hot term in the business world for the past few years. Chargebacks on credit cards is a way for the consumers to dispute a debit or credit card transaction. Thus, the cardholder can contact the issuer, the bank, and explain the problem and ask them to transfer their money back. There are quite a few cases in which the reasons of the clients are actually dependable.

In case the cardholder presents a reasonable statement, the issuer begins the chargeback process so as to provide the cardholder with his claim. During the conduct of the chargeback process, the card issuer obtains funds from the respective brand, to which the payment was made, and gives it back to the cardholder. Even though it is considered a fraud by most of the brands, it is still a legal process.

The Pre-Arbitration Process:

Most of the times, the merchant wins during the first Chargeback proceedings, and thus, he receives the disputed charge. However, a merchant almost never wins during the second Chargeback or Pre- Arbitration. On the other hand, if you do not want to lose the first chargeback, then you can present the issuer with compelling evidence to support your stance. Fraud prevention becomes quite difficult in such situations. You should keep in mind that the information, or the evidence, should be thoroughly reviewed before handing it over to the issuer for a claim.

The documentation that you present for support should be legitimate. However, if you still lose the first chargeback, you should prove it to your issuer that your information was correct so that the issuer does not consider you a fraud. Any information you have on the subject should be submitted to the issuer to settle the dispute of the transactions. The reason why the second chargeback falls mostly in the favor of the cardholder is that the cardholders still claiming the Chargeback and on the Pre – Arbitration process the decision makes is the card brand who always support the rights of the cardholder, Ruled the chargeback in cardholder’s favor and reimbursed to them. Even if the merchant submitted strong evidence to card brand or issuer bank for Pre-Arbitration, those would not enough to get win 2ndreversal.

Preventing Chargebacks:

You should definitely not take a card back once it has been declined, in order to save yourself from an irreversible chargeback. Chargeback is a potentially expensive part of the credit card process. If you make online purchases through your credit card, then make sure to get signed the delivery receipt by the customer. It is vital for you to keep track of all of your credit card payments because if you fail to respond to a retrieval request then you might get charged with an irreversible chargeback.

Furthermore, if you want to reduce the retrieval request then make sure that your sales drafts are legible. In this way, you would be able to identify any transaction that has been made from your credit card.

Merchant Account for continuity/subscription Merchants [MCC 5968]

You are offering a free trial on your site? We can integrate your eCommerce website with our payment gateway so that your business can accept and rebill customers for your free trial and continuity offer!

If you are selling products that require Free Trial, you will need a recurring merchant account and a payment gateway. Most business owners don’t understand the difference between a recurring merchant account and straight sale merchant account. If you don’t know then setting up your e-commerce website can be difficult and you may hit by overwhelming fees, chargebacks and may result in Account Closure!

What’s Trial Continuity?
When someone buys a product with the free trial offer, the cardholder accepts to the Terms and Conditions and enrolls in a Trial Continuity Subscription. The website will send this information to the payment gateway for authorization and processing. Once the trial period is overpayment gateway will bill the customer again for the pre-decided to rebill amount. All this process go through Stronghold‘s Recurring Payment Gateway which is at the center of every transaction that customers are going to process. The Cardholder can choose to call in or email in anytime within that time period to cancel and/or extend the trial period.

• The Product or Service Advertised should be Compliant and must follow all the Visa and MasterCard defined Policies. SSL Cert, Secure Checkout, Terms and Conditions, Privacy Policy, Refund Policy and Return Policy should be clearly mentioned.

Continuity/Subscription Merchants [MCC 5968]

Interchange plus 4.25%, .35$ Transaction

A Dedicated Free Trial Merchant Account is one that is set up just for your business. Merchant Stronghold Accepts Start-Ups too. Usually, the rates are according to the volume of sales and type of product you are selling. It is considered “High-Risk Business” and comes with a standard 10% Six Monthly Rolling Reserve. If you like the thought of controlling your money and ability to set rates, then you should go for a dedicated merchant account. There will be an in-depth discussion on setting up a dedicated merchant account. It usually requires Strong Finances, Appropriate Fulfillment Agreement of your advertised products. Stronghold’s Compliance team checks for any Red Label Ingredients, etc.

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