Unfortunately, chargebacks come along with running a business. And while there are ways to prevent chargebacks, even successful and efficient businesses will experience them occasionally.
But what is a chargeback?
Put simply, a chargeback is a reimbursement of funds to a consumer, typically due to fraud.
Chargebacks can be costly for your business, so when one occurs, it helps to keep in mind these chargeback management tips:
1. Understand the cause of the chargeback.
While most chargebacks are caused by someone fraudulently making an unauthorized transaction on another person's credit card, they can also result from other circumstances. Dissatisfied customers may dispute charges rather than undergoing the proper return and/or refund processes, for example. A chargeback may also result from something as simple as a clerical error at the time of the purchase or during processing.
It's important to know what led to the chargeback, as this may impact how you proceed, and whether or not you argue that the transaction was legitimate.
2. Follow your bank’s instructions exactly.
At the time of the chargeback, your acquiring bank will share instructions on how to proceed. Different banks have different procedures for addressing chargebacks. Even if you decide you are not going to argue against the chargeback, be sure to follow your acquiring bank’s directions, exactly. Failing to do so may put you at risk of forfeiting your rights as a merchant in the situation.
3. Respond to chargebacks quickly.
This is particularly important if you plan on disputing the chargeback, as banks have varying time limits on when a merchant can make their case.
4. Expect to see a chargeback fee.
Part of what makes chargebacks so costly for businesses is that regardless of the outcome, the merchant will always incur a chargeback fee. These are typically between $10 and $25 and charged by the issuing bank for the costs of the investigation. While irritating, these are an unavoidable part of managing a chargeback, so you should not be surprised or concerned when this appears on your credit card processing statement.
Chargebacks are just part and parcel of doing business. And while they can be costly and perhaps even a bit intimidating, taking steps to effectively manage them can facilitate smoother resolutions, so you can get back to running your business.
Find out more about chargebacks and how they could affect your business.