Consumers often use credit cards for purchases due to the convenience. Many of them offer rewards too. However, another reason to use them is the protection such a method of payment can offer to a customer. A credit card chargeback can be filed by a customer if they aren’t happy with a product/service, they have billing concerns, or they believe fraud occurred.
Merchants have a responsibility to be ethical and legal in their transactions with customers. Sometimes, these issues can easily be worked out. For example, a customer doesn’t recognize a charge so they file a chargeback. Once they learn what the charge was for, they remember that transaction, and the case is closed.
Not all credit card chargebacks are cut and dried though. This is where clear policies within your organization make a difference. They can give you a leg to stand on to win such disputes. If you don’t reply or the credit card company sides with the customer, you are out that money. If you get too many chargebacks, your merchant account can be in jeopardy too.
What are Chargebacks on a Credit Card?
Any time a customer isn’t happy with a charge they see on their credit card; they have the opportunity to file a chargeback. Some do so legitimately but others seem to take advantage. They want a product or service, but they don’t really want to pay for it. Other times, it is an honest mistake and they forget about a purchase or someone else in the household made it.
There are times when consumers have legitimate reasons to dispute a charge. Regardless of why such a chargeback is filed, it gives the customer the opportunity to get their money back. Typically, the account is credited at the time of the chargeback. However, the credit card company makes it known that if they don’t decide in their favor, that charge will be processed again.
How does a Credit Chargeback Work?
A chargeback should be considered as the final step when the issue can’t be resolved. Credit card companies ask the consumer to first reach out to the company for additional information or to find a solution. The name of the merchant along with a contact phone number should be on the billing statement for each transaction.
When consumers can’t get in touch with the company or they didn’t like the outcome, they have a right to file a chargeback. They will complete a form by phone with a representative or online. They will provide as much information s they can about the reason they don’t feel responsible to pay that charge. The credit card company will likely give them credit while the scenario is being investigated.
The credit card company gives the consumer an opportunity to share information and any supporting documents with the chargeback claim. Next, the credit card company reaches out to the merchant to share that information. The merchant can accept the claim and agree for the funds to be given back to the customer. They can dispute the claim when they feel the charges are correct.
There are three main reasons why consumers file chargebacks. Most but not all complaints fall under these categories.
Unfortunately, credit card fraud and identity theft are huge issues due to electronic payment processing. Scammers can remain anonymous and often get away with such theft. It is hard to track them down and even harder to hold them accountable. When a consumer feels they didn’t make a purchase, they are going to question it.
If they believe the charge is fraudulent, it has to be investigated. The card issuer may issue them a new card number too as an effort to prevent further problematic charges. They often encourage consumers to check other credit cards for charges they don’t recognize and to notify the credit bureaus.
The largest reason for credit card chargebacks stems from billing disagreements. The customer may feel that they have been charged too much for their order or for shipping costs. Monthly memberships tend to be a common problem, as consumers don’t always read this information. They sign up and then they are surprised when they see an ongoing charge on their card monthly.
Not Happy with the Product or Service
Consumers have a right to expect quality products and services. When that falls short, and they can’t resolve it with the merchant, they may file a chargeback for the funds with their credit card company. Often, products are returned to get the money back, but that isn’t always possible. Some merchants don’t accept returns or it costs a significant amount of money to send the item back.
It is harder to prove you aren’t happy with a service because there isn’t anything tangible. However, if certain things were promised that didn’t materialize, then that can be grounds for a chargeback.
Disputing a Chargeback
Merchants should take chargebacks seriously. It means customers aren’t happy with something and they didn’t feel the business handled their concern well either. There is a deadline for responding back to a chargeback. If that deadline is missed, the consumer will win by default. It is important to share all details when disputing a chargeback. This includes:
- Copy of all policies that affect why you aren’t issuing a refund to the consumer.
- Efforts attempted to resolve the situation with the customer.
- Copy of all charges and a breakdown of them if billing is part of their complaint.
- Copies of any membership, the cost, how often billed, and when they can cancel if the complaint is about a membership program.
- Collected information about an order including name, phone number, email address, shipping address, billing address, and IP address for any complaints about possible fraud.
Find a Solution for Repeat Problems
Too many chargebacks can cause a merchant account to be shut down by the provider. Merchants need to work hard to alleviate problems, especially for those that they see again and again as chargebacks. This means something isn’t clear or something isn’t acceptable to customers. Such information can be used to improve business practices and prevent future chargebacks.