Chargeback Basics You Should Know

Article submitted by: Solidtrustpay

Chargeback is a serious concern many businesses are faced with at present and especially with the rapid growth of online sales. Chargebacks can cost a business a great deal both moneywise and time wise. So what does one need to know about chargebacks and what steps can be taken to prevent it?

A chargeback is when a customer contests a charge in his credit card statement. This can be done for various reasons such as:

Non authorization of payment – can happen where the credit card has been stolen and there has been a fraudulent transaction.

Goods not delivered – happens when a customer has made a legitimate purchase using his credit card but later disputes the payment on the ground that the goods ordered were not delivered. This could be done with fraudulent intentions.

Technical issues – the customer has been charged twice for the same transaction or the wrong amount has been charged.

Credit not been processed – the customer has returned the goods to the seller but the payment has not been refunded.

What happens when a chargeback is claimed?

When a customer raises the issue about a payment with the credit card issuing bank, it will be referred to the merchant bank that in turn will refer it to the merchant. The responsibility lies with the merchant to prove that a legitimate transaction did take place and the goods were duly delivered to the customer. In the even the merchant is unable to provide such proof he will have to accept the chargeback claim and refund the money to the customer.

What effect does a chargeback have on the business?

The merchant has to spend a considerable amount of time trying to prove the validity of the transaction and this involves locating sales receipts and other evidence. This time would otherwise have been constructively spent on more important matters.

If he cannot prove otherwise and has to accept the chargeback, he is compelled to refund the money the customer has paid. This is not the only loss the merchant will suffer, he also has to bear the cost of the goods that were already delivered along with the delivery charges and the merchant bank will charge fees for each chargeback as well.

It is estimated that for every $1 paid back for chargebacks, it costs the merchant $2.30. This basically sums up the serious effect it has gon the business.

What can be done to prevent chargeback?

When doing online business use an Address Verification System which checks if the credit card billing address and the delivery address matches to reduce the chances of chargeback.

Chargeback can ruin a good business if necessary steps are not taken to curb it from the beginning. Find out what can be done to prevent chargeback and apply it to your daily transactions to safeguard your business.