What is a Chargeback?

If you sell goods or services online and you're not sure what a chargeback is, you're not alone. Here we explain chargebacks in plain English.

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As mentioned in a recent post, we went to quite a few ecommerce conferences in 2016. Among the things we took away from these gatherings: some business owners and executives in the ecommerce space are fuzzy on the term  "chargeback". Others know what chargebacks are but are unsure how many are hitting their accounts.

At an ecommerce company grossing under $1M per year, chargebacks may be rare -- so may rank low on a busy business owner's list of priorities. But if a company is grossing over $1 millions chargebacks, its exposure is higher, and the proportion of chargebacks to total CNP transactions warrants leadership's attention. 

So, what are chargebacks?

First, the customer initiates a claim

A chargeback occurs anytime a cardholder (customer) calls the credit card issuer instead of the merchant to dispute a transaction. The customer may tell the issuer that they deserve a refund because: he or she did not receive the goods or services; received faulty goods or services; received things too late; or received goods or services they never authorized purchasing.

The bank gives a provisional refund

The bank has no evidence against the cardholder's claim, so it issues a provisional credit to the cardholder and request a credit from the merchant's bank.

The issuing bank notifies the merchant of the chargeback request. And the merchant's own bank will ask for records of the transaction in question.

(Though if the merchant is receiving Chargeback Prevention Alerts, they may be able to intervene before the chargeback hits their account.)

Then it's the merchant's turn to act

The merchant is allowed time to respond. If the merchant challenges the chargeback and promptly provides compelling evidence that the transaction was legitimate, the issuer should retrieve the funds from the customer and move them back to the merchant's account.

If the merchant does not respond, responds too slowly, or responds with insufficient evidence that the transaction was indeed valid, the customer keeps the refunded money.

Time frame for disputing a chargeback

The specific timeframe for responding to a chargeback varies depending on which card issuer is involved. But the general timeline is as follows: a consumer has 120 days from the date of the initial transaction to file a chargeback. Once they file a chargeback, the merchant usually has 30 days to dispute it.

After that, it may take as long as another 75 days for the credit card company to resolve the claim.

We invite you to learn more our company and our customer retention program. Strong Call United, Inc. is offers:

• Experienced chargeback-reversal specialists
• Advanced chargeback management technology
• Proactive, unified relationship management, and
• Responsive customer service and support

Prefer to learn more by phone? Please ring us at 786-316-5862  Mon-Fri 10:30 a.m.-4:30 p.m. Easter Standard Time.