Term

What is Chargeback?

3 MIN READ

Chargeback

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.

Categories of chargeback

There are 4 general categories for a chargeback:

  • Technical, when the buyer has insufficient funds to buy an item.
  • Quality, when the buyer didn’t receive a package or goods were of poor quality in comparison with the goods suggested.
  • Fraud, which is the most common reason also. A fraud claim is applied when the product has been purchased without the buyer knowing about it or giving his approval
  • Clerical, which happens due to the bank’s error. In such cases, clients are typically billed twice for the same item or the product has been returned.

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.

Disputes

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:

  • Claims of fraud. Mistakes can occur from both customers and merchants. Therefore, if merchants can provide evidence of customer ordering from the shop himself (for example, he entered his address and personal information while filling the form on the website) sellers can decline the claim of fraud.
  • Keep in touch with a customer. In ecommerce, customer support representatives are obliged to contact each customer, in order to confirm their orders.
  • Shipment delivery proofs. Companies with a receipt of a successful delivery containing the customer’s signature can guarantee the chargeback withdrawal.

 

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