Chargeback, also known as a reversal, is a process when a buyer disputes a purchase, which has been made using his credit or debit card. Claims for chargebacks occur when a buyer considers the purchase fraudulent or when the purchase has been made without their consent or knowledge. Banks typically review the transaction and if the case of fraud is confirmed, the buyer gets a full reimbursement.
Chargebacks have a negative impact on retailers and ecommerce merchants, in particular, because if companies receive constant claims for chargeback they will get penalties or even shut down.
There are 4 general categories for a chargeback:
Chargebacks fall into one of the listed categories for companies to act accordingly in the future. In case of fraud, however, banks can specify a real fraud, when a customer has been deceived, and “a friendly fraud”, when a customer received an item but applied for a chargeback anyway.
There are cases when customers apply for a chargeback even if there wasn’t any mistake in delivery and they received their goods. Because such things can happen, businesses can open disputes, so that a bank will withdraw a chargeback. These disputes aim to convince the customer and bank representatives that everything from the side of the merchant has been done correctly by showing evidence and proofs of successful delivery.
To reduce the chance of chargebacks, there are important steps for business owners to take:
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