Practical Solutions For Your Business
What is a chargeback?
A chargeback is the reversal of a sale transaction that arises from a processing technicality, a customer dispute or fraudulent activity. Most chargebacks are violations of the rules and regulations established by a payment brand, such as Visa®, MasterCard® or debit network. Chargebacks are something every business wants to avoid, as they can result in lost revenue.
Why did you receive a chargeback?
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
- Has been billed twice
How does a chargeback get generated?
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 Chase. Chase, in turn, will debit the funds from your settlement account.
- Chase then sends you documentation that notifies you about this chargeback, or opens a case in the free online chargeback management system, if your business subscribes.
How will you receive a chargeback?
Chargebacks can be received from Chase in either one or two ways.
- Chase offers you access to a free interactive chargeback management system that enables you to manage chargebacks and retrievals online. You can view and respond to inquiries, dispute or accept chargebacks, and fulfill retrieval requests. You can also respond to Chase by providing a scanned sales receipt, other documentation, or a combination of both.
- If you get a chargeback, and you do not subscribe to the free online chargeback management system, you should receive a Chargeback Document from us via fax or mail.
How to dispute a chargeback?
When Chase receives a 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. If you subscribe to Chase’s free online chargeback management system, the process can be managed electronically, saving you time and money.
Complete the Chargeback Document with as much information as you have available, and return it to Chase ’s 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 submitted 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 within the timeframes associated to the reason code, then the chargeback automatically moves forward unchallenged and the chargeback funds will not be returned to you.
How can you prevent chargebacks?
Chargebacks can cost time and money—while some chargebacks cannot be prevented, many can with comprehensive employee training.
The best way to prevent chargebacks is to establish best practices at the time of sale that are followed consistently by all employees. Here are some tips:
- Never alter a sales receipt.
- Always obtain an authorization for the exact amount of the transaction processed to the card.
- If authorization is declined for the full amount of the sale, don’t try to get an authorization by “splitting” or lowering the amount of the transaction.
- If you can’t get a single authorization for the full amount of the sale, then decline the credit card transaction and request another form of payment.
- For transactions where the card is present at the time of sale, always process a chip card with your EMV-enabled terminal. If the transaction is not processed successfully, follow the prompts on your terminal to resolve the matter.
- When a customer is due a credit and the original sale was made on a credit card, process the credit back to the original card number instead of refunding by cheque or cash. If a credit is due on more than one sale, then process each credit individually.
- For debit processing, when a customer is due a credit and the original sale was made on a debit card, process the return back to the original debit card instead of refunding by cheque, cash or credit card. If a credit is due on more than one sale, then process each credit individually.1
1Dependent on merchant set-up
- If the sale is being conducted in-person, make sure your return policy is pre-printed on the credit or debit card transaction receipt and signed by the cardholder at the time of the original sale.2 The refund policy must be close to the cardholder’s signature to be recognized by the payment brands.
2Signature may not be required for Chip Credit and Debit Cards.
- If the card is present at the time of sale, always compare the cardholder’s signature to the signature on the back of the card. If the signature panel is blank, then ask the cardholder to sign it. If the cardholder refuses, then you should request another form of payment.3
3Signature may not be required for Chip Credit and Debit Cards.
- Respond to all retrieval requests with valid, legible documentation
- If the card is present at the time of sale, be sure to compare the credit card account number on an electronically printed draft to the credit card number embossed on the credit card. If the numbers don’t match, call your Automated Voice Authorization Center and tell the operator that you have a “Code 10” authorization and that the card numbers do not match.
- For e-commerce sites, it’s recommended that all transactions be reviewed for address verification results and that the Customer Identification Number or Card Identification Number (CID) be required.