Returning money to a customer is not the most pleasant practice, but a very common one for businesses who operate with merchant payments, including those selling their products online. Let’s take a closer look at cases when a client can initiate a chargeback procedure and how to reduce the risk of getting in these situations.
What Is a Chargeback?
A chargeback happens when a seller and a client can’t solve the issue of the money return, and the client wants to “collect” money from the seller. This situation involves not only two sides, but also the buyer’s bank (issuer), the seller’s bank (acquirer), as well as the payment system.
Chargeback has been adopted by the payments industry as a consumer protection tool. If the service was not provided, the company went bankrupt, and the goods were not delivered, the client can contact the bank that serves them and apply for a chargeback. At the same time, there are not only advantages but also cons: dishonest clients can use this procedure to simply cash in on entrepreneurs.
As a seller, you need to remember that customers have the right to request a chargeback through the bank under the following circumstances:
- Your business went bankrupt;
- The product does not look as described or is defective;
- The paid product was not delivered, and you refuse to give money back;
- Technical issues: the authorization period has expired, or the bank has failed to process the payment;
- Incorrect transaction;
- The withdrawn amount differs from the value of the goods indicated at the time of the purchase;
- Due to a system error, billing is being charged multiple times or the amount is incorrect.
The rules set by Visa and Mastercard usually give the customer 120 days to file a claim. Usually, the countdown starts from the date of payment. Further, the process looks like this:
- The bank considers the case and, if real reasons for the return are identified, contacts the seller’s bank;
- If a violation by the seller or card fraud is detected, the store owner is notified;
- If the seller does not dispute the decision (the appeal period is 45 days), the money is transferred to the victim’s card.
How to Minimize Risks of Chargebacks
There are times when a chargeback turns into a fraudulent scheme, where criminals buy a quality product/service and then try to return the money without any reason. They want to get the product for free. What should you do then?
To protect your business from frauds, follow these tips:
- Always respond to requests
If a client contacts the seller directly, it is important to get in touch, engage in a constructive dialogue and do everything to solve the issue. Otherwise, an unanswered message can be an argument in favor of the buyer.
- Dispute
If a claim looks suspicious and unfounded, it is important to promptly collect counterarguments and dispute the chargeback claim. Usually, the seller has up to 45 days for this.
- Indicate the name of the company in the payment description
Payment providers allow a business to set up a personalized description including a company name, product category, or even an order number.
- A clear return policy
It is important to describe how a client can return the product. Write down all of the circumstances in detail, include terms and ways of returning, etc.
- Maximum information
Provide accurate and detailed information about your products and services. Warn your clients if some product characteristics in real life might differ from the photo/video.
- Safe payment process
Fraudulent card transactions are one of the main reasons for chargebacks. It is important to check your payment provider and know exactly how it protects bank card data and which technologies it uses to monitor and prevent fraud.
Knowledge Means Safety
Before you start selling online, remember that accepting payments with bank cards is inextricably linked with the risk of getting a chargeback. You should always be prepared for the fact that a dissatisfied or deceived client might ask for a refund on the card. A business might not be 100% secure against chargebacks, but these simple steps can dramatically reduce the risks of fraud. However, it is also a seller’s responsibility to respond and satisfy a client.
