What is a Chargeback? Can it effect me?

A Chargeback is the return of funds to your customer! It is done forcibly and initiated the a disgruntled customer to get their money back. Specifically, it is the reversal of FUNDS paid to the merchant for products and/or services sold. Chargebacks exist primarily for consumer protection. According to Regulation Z of the Truth in Lending Act,  credit cards issued in the United States are afforded reversal rights of protection and are guaranteed reversal rights by Regulation E of the Electronic Fund Transfer Act. A customer initiates a chargeback by contacting their credit card company and filing (in writing) a complaint regarding a sales transaction by a Merchant. The customer's credit card company then sends notification to the Merchant Processing Company whose bank in turn pulls the funds from the Merchant's Bank Account!

Immediately, the "Chargeback Process" initiates a LETTER, sent via USPS, to the merchant explaining what needs to be done to prevent the complete reversal of the money back to the customer. Usually, the merchant needs to provide a signed copy of the customer's receipt. Proof of the merchant's "refund, return or exchange" policies and a reason why the merchant feels the customer should NOT get the money refunded. Unfortunately, the threat of forced reversal of funds gives merchants an incentive to provide quality products, helpful customer service, and timely credits/refunds, when promised. Chargebacks are also used as a means reversing unauthorized purchases due to identity theft. But more and more today, Chargebacks are blatant cons on the part of the purchaser to "have their cake and eat it too"! They want the product or service but don't want to pay for it or perhaps the warranty expired and now want their money back!

Card associations, Visa, MasterCard, Discover, American Express and others have express chargeback rules and are available online at their respective websites. Basically, these rules are a system for mediating the transaction disputes between cardholders and merchants but documented evidence of the transaction, like signed receipts, correspondence, video evidence, phone call recordings, etc. Help a merchant KEEP THE FUNDS. However, it if the MERCHANT does not follow-up on these CHARGEBACKS - the money is REVERSED!

Here are the TOP 10 REASONS for the REVERSAL OF FUNDS:

1. Merchant does not even open the letter until it is TOO LATE to FIGHT!
2. Documentation received was invalid or incomplete
3. The merchant didn't provide the services or failed to send the products.
4. A recurring transaction was processed after the cardholder requested termination, the account had been closed, the charge exceeded the predetermined amount, or the merchant failed to notify the cardholder of the upcoming charge.
5. Merchant sold defective product or service and would not work to correct problem with customer.
6. Fraudulent multiple transactions/Fraudulent processing of transactions
7. The MERCHANT or one of their employees "forced" through a credit card that was either Declined, Expired and had NO Authorization/Approval Code. (Seen a lot with Sales Reps)
8. The merchant failed to credit the cardholder's account after a return was made.
9. A single transaction was processed more than one time.
10. The cardholder did not participate in the transaction (a fraudster made a duplicate or counterfeit copy of the card). 

If you are a Retail Business, installing an EMV Enabled Credit Card Terminal gives you significant piece of mind and dramatically reduces fraud and chargeback liability. EMV chip cards are almost impossible to counterfeit as they have increased security measures like tokenization - a process that swaps out the primary account number with a value called a token or a new code on each transaction. In conclusion, if you have an EMV capable terminal, it is crucial that you make sure that you are processing all chip cards with the chips instead of the magnetic stripe. 

If you are a card-not-present merchant, Fraud and Chargeback issues still arise due to the nature of the sale. The best thing you can do, is to work with a merchant processing company that knows how to properly submit a "chargeback claim" and get your funds back into your bank account! 

Merchant Processing Solutions Inc. has worked tirelessly to aid our merchants in Chargeback Disputes. We almost consider ourselves experts in helping our merchants KEEP their hard-earned money! So, if you are working with a merchant processing company today that DOES NOT HELP YOU with your chargeback disputes, call us TODAY! 

954-938-2420