A chargeback is a mechanism of protection of customers through which a transaction is refunded in dispute, either the cardholder or merchant, depending on the case.
How does it work?
The chargeback process begins when the cardholder informs a complaint to the issuing bank. At the time the complaint is received, the card issuer proceeds to investigate the dispute. If the bank have evidences that the transaction was misleading, the payment will be canceled.
In this process, the trader has the burden of proof, which means that if he fails to demonstrate that the transaction is legal, the cost of the good or service in question is deducted from his account and transferred to the customer’s account. Besides that, the “chargeback rate” is charged to cover the cost of processing a chargeback. However, if the trader has evidence to prove that the transaction is legitimate, no refund will be made. Despite this, he will still be charged the usual processing fees.
In other words, demonstrating that there has been a breach of contract is the prerequisite for reimbursement through the scheme chargebacks. It is also important to note that while chargebacks not only are usually requested by the client, but also can be requested by the merchant.
Reasons for a chargeback
Each card brand has its own reason codes for chargebacks, but some of the most common reasons include:
- No time to respond to a request for recovery
- Proven fraud
- Finishing services
- A transaction is not recognized
- A transaction refused
- Doubling the transaction (ie, the customer was charged more than once)
- Technical problems during the transaction process
- The merchandise was returned
- The charges were not foreseen
- The goods have not been received, they are damaged or not as described
Ratio of chargebacks
Traders have to be very careful in dealing with chargebacks as normally banks establish a specific threshold that must not be exceeded. In most cases, it is 1% (or less) of the total sales. The processing of a disproportionate number of chargebacks could have serious consequences for an enterprise. The merchant may be subject to a heavy fine or payment processing account can be closed.
Publicado en: Using SetPay