Chargebacks – What You Should Know

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Chargebacks… many businesses have them. Some more than others. We are going to discuss what they are, the fees associated with them, and how to best protect your business.

The Quick Breakdown.
What is a chargeback? (Important for those new to the business world) A chargeback is when a customer disputes a charge with their card issuer. i.e. someone stole my credit card and used it as such and such business. A chargeback is NOT a refund.

What happens with a chargeback?
Well, first of all, the amount of the transaction is deducted from the business’ bank account and held in escrow. On top of that, for most credit card processing companies, the business is then charged a Chargeback Fee. This fee typically varies between $15.00 and $25.00.
IMPORTANT TO KNOW – Even if your business wins the chargeback case, you are still charged the Chargeback Fee.

In most cases, the business is initially notified via a mailed letter in regards to the disputed transaction. The letter gives instructions on who to contact about the chargeback. Each chargeback has a deadline in which there must be a response from the business. A benefit to True Merchant’s customers is that they also receive notifications via email and the CardPointe dashboard if a chargeback does arise.

Tips to Avoid Chargebacks
Refund the same card. Never refund in cash.
If you need to refund a customer who paid with their credit card, do so with the same credit or debit card they made the payment at your business with. Do not refund in cash. This provides an easy out for someone to say they never received a refund and then they can dispute the transaction with their card issuer.

Accept EMV cards on card present transactions.
If you swipe a customer’s EMV card, the customer can dispute the transaction and you have no way of winning the dispute. This is known as a fatal chargeback. It has become commonplace in business since the EMV mandate took place a few years back.

Complete your Due Diligence on Significantly Higher Volume Transactions.
Let’s say for example, that you own a retail store where your average transaction is $100. If an unknown customer tries to purchase many of your products for an out of the ordinary dollar amount such as $8,000, it’s best to request additional documentation. Getting a copy of a photo ID such as a Driver’s License or Passport could protect you from losing out on potential stolen merchandise.

What You Should Know
This is One Time When Your Credit Card Processor is Not the Villain.
No matter who your credit card processor is, in the majority of cases, it is not their fault if you have a chargeback. The chargeback process is standard with most companies. Unfortunately for businesses, the chargeback rules favor the consumer.

How to Best Protect Your Business
Make sure that your credit card processor has the correct mailing address setup. In the scenario where a chargeback does occur, you need to be notified as soon as possible. Ask your processor if there are any other methods of communication which are available if one were to happen.

Our mission at True Merchant is to help as many small and mid-size businesses as possible. We do this by educating businesses on the good and bad of credit card processing. We are focused on providing the best value with our elite security standards, great customer support, and low transparent pricing. If you are interested in learning how True Merchant can help you and your business, please contact us today.

Authored by:  Jimi Romanus