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Chargebacks and Refunds Are Not Equal

A “chargeback” is a debit to your merchant account that occurs when a buyer denies a charge directly with the credit card company instead of asking you, the merchant, for a refund.  Buyers may have these reasons for making a claim:

  • recurring charge not canceled as requested
  • non-delivery of the item
  • wrong item delivered
  • defective item
  • unauthorized purchase
  • the buyer does not recognize the description of the charge on the statement

For every chargeback you receive, you not only lose the revenue and perhaps the merchandise, but you also have to pay a non-refundable chargeback fee to your acquiring bank.

Fighting Chargebacks

Although many chargebacks are legitimate, more and more often, the chargeback is made by the buyer with the intent to defraud. Currently is makes up 30% of all chargebacks and this number is increasing every year.

As a leading provider of Point of Sale systems and credit and debit card processing in Nashville, TN, we urge merchants to question every chargeback. Don’t simply accept the assigned reason code for the chargeback as the truth. Try to identify the actual cause of the chargeback with the customer. Don’t take the attitude that chargeback fraud is simply part of the cost of doing business. Every time you do not fight a chargeback, you are saying to the acquiring bank, “This is legitimate, and I am at fault.”

It’s important to fight chargebacks for these reasons:

  • It protects your reputation with customers and banks.
  • Recovery of revenue helps your bottom line.
  • It helps identify repeat offenders for blacklisting.
  • It emphasizes the problem in the industry which can spur the industry to take steps to better identify and prevent customer fraud.

Prevention Is Better Than Winning the Fight

Preventing a legitimate or fraudulent chargeback is always better than having to fight a chargeback. It cost you less money and less time. So be sure you are doing all you can do to prevent chargebacks.

If you are one of our customers, you know that we are only a phone call away. If chargebacks are becoming a problem for you, we can give you some advice about best practices.