What is a Chargeback ?
The term "chargeback" describes the process that occurs once a customer refuses to accept responsibility for a charge on his credit card. It may also be initiated by the issuing bank due to a technical issue, such as no authorization approval code received. Chargebacks are something every business owner wants to avoid, as they can result in lost revenue.
Mastercard Chargeback Guide
Card Acceptance Guidelines for Visa Merchants
MasterCard Training Videos
Card Acceptance Guidelines and Chargeback Prevention Tips/Questions
Visa: 5 Simple Steps to Safer Key-Entered
Transactions
Visa: Heads
Up to the Warning Signs of Fraud
Restaurant Owners Best Practices
E-Commerce Best Practices
There are two entities associated with the credit card chargeback system – retrieval requests and chargebacks.
- A retrieval request comes from a cardholder or their bank, requesting to see a copy of a sales draft or a mail order form. This can be done for a variety of reasons ranging from verifying a sale to tax purposes, and sometimes for fraud reasons. Failure to supply a draft by the date requested in the retrieval letter could result in a chargeback.
- A chargeback is the reversal of a transaction previously processed by your business. The amount of the transaction is deducted from your account. Chargebacks are usually initiated by the customer (the cardholder), but can also be initiated by the cardholder’s bank. While some chargebacks cannot be prevented, the basic steps outlined below prevent some of the most common errors and help you avoid chargebacks when possible.
Why You May Have Received a Chargeback
There are many reasons why chargebacks happen, but these are some of the most common. Your customer:
Did not receive a product or service
Does not recognize the charge or business name on his credit card
statement
Believes the product or service was defective, damaged or not as it was
described
Was a victim of fraud - his credit card was stolen or used without
consent
What You Can Expect
The chargeback process involves many players: the customer, their issuing bank, the payment brand (for example, Visa or MasterCard), the acquirer/processor (such as Chase Paymentech) and you, the merchant.
If your customer appears to have a reasonable claim, the issuing bank will make a temporary credit payment to your customer and this begins the chargeback process. Funds for the credit to the cardholder are debited from your merchant account during this process.
Tips for Preventing Chargebacks
The best way to prevent chargebacks is to establish best practices at the point of sale that are followed consistently by all employees.
Do not complete a transaction if the authorization request was declined. Do
not repeat the authorization request after receiving a decline. Request another form of payment.
If you receive a call message in response to an authorization request, call
your authorization center. The operator may ask to speak with the cardholder. If approved, write the
authorization code on the sales receipt. If declined, ask the cardholder for another form of
payment.
Deposit credit receipts with your merchant bank as quickly as possible,
preferably the same day as the credit transaction is generated. Failure to process credits in a timely
manner can result in chargebacks for credit not issued.
Obtain the cardholder’s signature. The cardholder’s signature on
card-present transactions is required. Failure to obtain the cardholder’s signature could result in a
chargeback for no signature if the cardholder denies authorizing or participating in the
transaction.
Ensure that transactions are entered into the point-of-sale terminal only
once and deposited only once. Entering the same transaction into a terminal more than once, depositing
both the merchant copy and the bank copy of the sales receipt with your merchant bank or depositing the
same transaction with more than one merchant bank can all result in duplicate-transaction
chargebacks.
Ship merchandise before depositing the transaction. Don’t deposit
transactions with your merchant bank until you have shipped the related merchandise. If customers see a
transaction on their monthly credit card statement before they receive the merchandise, it could lead to
chargebacks.
MOTO Transactions / E-Commerce Chargeback Prevention Tips;
Mail-order/telephone-order (MOTO) transactions are very risky because the card and cardholder are not present. Because of the higher incidence of fraud, the following suggestions are offered to assist you. However, they will not prevent all chargebacks associated with MOTO business.
When completing a MOTO order, request the cardholder’s billing
address and phone number. Indicate on the sales draft what was purchased or the services rendered.
Sometimes, customers forget specific transactions and the more information you provide them, the better.
Always ask for the CVV or CCV2 number for AVS validation. This will allow
you to verify the cardholder’s billing address with the card-issuing bank, and can assist in
identifying unauthorized transactions.
FAQ: Chargebacks
A chargeback is the reversal of a sale transaction that arises from a processing technicality, a customer dispute or fraudulent activity. All chargebacks are violations of the rules and regulations established by a payment brand, such as Visa® or MasterCard®.
Chargebacks are something every merchant wants to avoid, as they can result in lost revenue.
Here are some of the most common reasons why chargebacks happen. Your customer:
- Did not receive a product or service
- Does not recognize the charge or payee on his or her credit card statement
- Believes the product or service was defective, damaged or not as it was described
- Was a victim of fraud – his or her credit card was stolen or used without consent
Once a customer realizes there is a problem with his or her transaction:
- Your customer contacts their issuer (the bank that stands behind the card), explains the problem and asks for their money back.
- The issuer researches the accuracy of the claim. If it is considered unreasonable, then the customer is responsible for the payment and your settlement funds are not impacted.
- If your customer appears to have a reasonable claim, the issuer will make a temporary credit payment to your customer and begin the chargeback process.
- During the chargeback process, the card issuer will obtain funds from the respective payment brand, who in turn debits the funds from TekCard Payments. TekCard, in turn, will debit the funds from your settlement account.
- TekCard then sends you documentation that notifies you about this chargeback via email, mail and your online portal should you have a subscription which TekCard provides to all of its merchants for free.
TekCard Payments carefully reviews all chargebacks to ensure their validity. If you get a chargeback you should receive the paperwork via a Chargeback Document from us via fax or the U.S. Post Office.
This document informs you that a debit has been made to your business checking account and gives you the option of accepting or contesting the adjustment. If contesting the adjustment, you will be required to respond by providing all specified information requested on the Chargeback Response form.
Note: The debit (removal of funds from merchant account) occurs upon receipt of the chargeback, but this document does not generate until the chargeback has a status of "return to merchant (RTM)."
- When TekCard receives chargeback from the issuing bank, we first look at our own records to try to resolve the chargeback automatically. If we do not have the necessary information, the chargeback will receive a status of "Return to Merchant" and we will send you a Chargeback Document if you manage your chargebacks manually. Complete the Chargeback Document with as much information as you have available, and return it to TekCard Payments Chargeback Department using the fax number or physical address on the form.
- If you fill out and submit this documentation, the analyst will review your rebuttal to ensure compliance with the payment brand rules and regulations. If your response is consistent with the rules and regulations, then the chargeback is represented for review by the payment brands, and the chargeback funds may be returned to your account.
- If you do not fill out and submit this documentation, then the chargeback automatically moves forward unchallenged and the chargeback funds will not be returned to you.
When a cardholder disputes a transaction, the issuing bank credits the cardholder, the payment brands credit the issuer, TekCard Payments credits the payment brands and that same amount is debited from your merchant account.
Received a chargeback or retrieval request? Give us a call and we would be happy to assist you!
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