What are credit card chargebacks?
To say we’re relieved that you want to learn about credit card chargebacks is an understatement. We at Verifi, want you to be armed with as much information as possible so you can protect your business.
A chargeback occurs when a customer disputes a charge on their debit and credit card. Until you can prove that the charge is valid and was approved by the consumer, the transaction is reversed back to the consumer. This chargeback process is a recognized method of protecting consumers from fraud and common billing disputes. When the chargeback occurs, the merchant has the right to respond to the chargeback with information to prove that the consumer did approve this charge and that it is valid. To do so, you need to provide clear evidence that the customer approved this transaction (such as time/date of goods downloaded, cardholder IP address etc). When you have proven that the credit charge is valid, the funds are returned to you and the customer is ultimately charged for the original transaction.
If this seems complicated, it is because chargebacks and fighting chargebacks is a complicated process. Because of this level of complication, managing and protecting your business from chargeback fraud is expensive, time consuming and requires you to have in-house chargeback and merchant services experts. This is why taking advantage of our merchant services such as Premier Chargeback Recovery Service and Cardholder Dispute Resolution Network is one of the best business decisions you can make.
To learn more about chargebacks and how you can protect your business, browse our Chargeback Knowledge Base.
Q. Are there different categories of debit and credit card chargebacks?
Yes, there are four general chargeback categories:
- Technical: this category applies when there is a technical problem during payment processing. For example, a consumer is accidentally charged twice for one purchase or the retailer incorrectly enters the credit card details. There can also be issues with the credit card authorization which result in the consumer’s credit card being charged, even though the initial charge was declined.
- Fraud: this is the most common credit card chargeback category. This category applies when the credit card was used fraudulently without the cardholder’s consent. One of the most common occurrences of this is identity theft. Merchants can use the representment process to falsify the claim.
- Clerical: mistakes do happen and often this is the reason for chargebacks that fall into the clerical category. The consumer may have returned an item and the credit card charge was not refunded or the consumer requested a refund and it was not applied to the credit card. These are basic human errors but in all cases, the merchant can use the representment process to falsify the claim.
- Quality: perhaps the consumer did not receive the item or the item was delivered damaged. In this era of digital sales, this is one of the most common chargeback categories. The merchant, is not considered liable for these charges upfront.
These are the four general credit card chargeback categories but you might still be wondering about the codes that you’re seeing. The four major credit card companies: Visa, MasterCard, American Express, and Discover all have unique reason codes that they use to identify the category and reason for the chargeback. In fact, between the four companies, there are 151 reason codes. We recommend you learn about these reason codes and ensure your team is also familiar with them. (Yes, this is a lot of information to manage and it’s for this reason that we want you to think about using our proven solutions to protect your business from credit card chargebacks.)
Q. What can I do as a merchant about credit card chargebacks?
While it is not possible to completely prevent credit card chargebacks, you can take steps to protect your business in the event that you must deal with credit card chargeback. To be honest, the best way for you to protect your business is to use Verifi solutions to help you and your business.
Taking advantage of our Patented Cardholder Dispute Resolution Network (CDRN) is one of the best business decisions you can make. This award-winning Saas-based solution, can help you stop up to 40% of your chargebacks. Verifi CDRN offers you complete coverage for both fraud and non-fraud chargebacks and allows you to protect your bottom line by avoiding costly fees, fines and penalties. Verifi’s zero-defect guarantee,* allows you to focus on your core business and gives you real time notifications.
Verifi is in the business of chargebacks and merchant services – this is what we do best and we do it for you! – Allowing you to focus on your core business and what you do best.
Along with using software and tools such as CDRN, you can also do the following to protect yourself from debit and credit card chargebacks:
- Make sure you really understand the four reason codes that a consumer can use. You also need to spend time familiarizing yourself with the 151 different reason codes used by Visa, MasterCard, American Express and Discover.
- Have very thorough records and documentation of very single sale and order. You are required to have valid physical proof that the customer processed an order for your service or product and ultimately approved the charge to their credit card to successfully represent a chargeback.
- You must have an outstanding customer service team. Your consumer need to feel valued and well looked after, when this happens, they are less likely to dispute charges. And don’t forget that your customer service team must keep detailed records of every conversation and online transaction with all your customers.
- Ensure there is no confusion about your company name. Often companies will use one name on their website and use another name for billing. This can result in customer confusion and increase the likelihood of a customer filing a dispute. Be clear about your company name in all forms of communication.
Q. How and where can I learn more about credit card chargebacks?
Whether you’re new to credit card chargebacks or are a seasoned merchant, you’ve likely got many more questions about credit card chargebacks. Credit card chargebacks are not simple to understand and because of the cost and risk they have for your business, it’s vitally important that you know everything you can about them.
We suggest you browse our Chargeback Knowledge Base to learn more about credit chargebacks.
Remember, our team is here to help you. We want to see your business succeed and this means you have the tools you need to focus on your core competencies while we, at Verifi, stay focused on protecting you from credit card chargebacks.
100% Accuracy – With Verifi’s zero-defect guarantee if a CDRN case is successfully resolved but later filed as a chargeback, you don’t pay.