Chargebacks: practical tips and tricks

As a merchant, you may have been confronted with a customer’s request for chargeback. This possibility to revoke a payment is a very useful means of recourse for consumers, aimed at protecting them against any abusive and unauthorized use of their bank card. Nevertheless, when the opposition is granted, it obviously has an impact on you. That’s why we discuss here the ins and outs of chargebacks.

What is a chargeback?

A chargeback is a procedure initiated by a customer with his or her bank in order to claim a refund of an amount paid to the merchant. This request can be initiated for example, after the delivery of a wrong item or a damaged product, when the amount has been accidentally debited twice or when the customer’s card has been stolen. A chargeback concerns transactions made with a bank card in a physical store and online.

How does a chargeback process work?

The cardholder can dispute a transaction with his bank and generally has 6 months after the purchase to do so. If the bank considers the dispute to be legitimate, the chargeback procedure is initiated and the amount of the original payment will be debited from the merchant’s account. If the merchant disputes the chargeback, he will need to provide evidence to support his claim. If the cardholder’s bank decides to accept the defense, the funds will be returned to the merchant by the acquiring bank. If, on the contrary, the defense is refuted, then the merchant will not get the transaction amount back.

In the event of a disagreement between the cardholder’s bank and the merchant, the parties may resort to arbitration and it will then  be up to the card scheme network to decide.

What do you need to know?

As a merchant, the burden of proof is on you. Each merchant is by default responsible for chargebacks. If you do not provide proof of sale clearly showing that the transaction was made with the cardholder’s consent, the amount claimed by the cardholder will automatically be refunded to him. The response time you have will always be specified by the acquiring bank and is usually 10 days following the request for supporting documents.

Finally, be aware that chargeback requests are assessed by the cardholder’s bank. Therefore, be sure to provide solid evidence that formally demonstrates the validity of the transaction.

How much does it cost?

The chargeback procedure involves the intervention of several parties, including the issuing bank, the acquiring bank and the card scheme network. It is longer and significantly more expensive than a traditional refund settled directly between the customer and the merchant. The costs associated with a chargeback are around 24 euros.

How to avoid it?

There are several easy tips to avoid chargebacks, starting with fulfilling the commitments made to your customers. Avoid late deliveries. In case of delay or out of stock, notify your customer as soon as possible. Once the parcel has been delivered, ask for a signature from the receiver as proof of confirmation.

Have a clear refund policy. Make sure your contact information is clearly visible on your website or in your store, so that the customer can easily contact you in case of problems. It’s also important to respond quickly to customer questions. This will avoid the need to initiate a chargeback with the bank. If a mistake was indeed made on your part, proactively refund the customer.

In addition to these simple actions, you can also rely on various technological tools.

Indeed, your payment terminal is an asset in the prevention of fraudulent chargebacks. All our terminals comply with the EMV standard (Europay, Mastercard, Visa), which aims to prevent fraudulent actions with cards.

In order to avoid manual amount entry errors, use a cash register software that establishes a direct communication between the cash register and the payment terminal, so that the amount is automatically displayed on the terminal.

Do you have any questions? Do not hesitate to contact us!