Chargebacks and Disputed Payments online

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A chargeback is the industry terminology for a refund granted to the customer by the card issuer in the case of a disputed payment. Chargebacks can seriously affect your business so it’s important that you know how to handle them, and more importantly, how to avoid them happening in the first place.

The rules

A customer can ask for a transaction on their credit or debit card to be reversed if:

  • They don’t recognise the transaction.
  • A purchase has been incorrectly billed – e.g. wrong price or entered twice.
  • A promised refund has not been processed.
  • They have had a problem with either non-delivery or faulty goods, and they have been unable to resolve the problem with the retailer.

In summary – a chargeback claim is the final level of protection for the customer against fraudulent card use and unscrupulous merchants. Your merchant provider will either raise your costs, or stop your account altogether if your chargeback level exceeds their acceptable levels.

Although there will always be unfortunate cases of fraud, you can also protect yourself.

Transaction not recognised.

Sometimes customers will dispute a transaction because a business appears on credit card statements under a different name, such as a holding company or a third party that is processing cards. If this is the case, ensure that this name appears on any printed receipts, or during the checkout process if you’re an online business. You should also ensure that staff at the company whose name appears on statements are able to answer any queries about your transactions promptly and courteously.

Fraudulent transactions

If you’re unfortunate enough to suffer genuine fraud, ensure that you follow the procedures set out by merchant provider, and respond quickly and fully to any enquiries and made by them, or the police.

Read our separate guide to fraud prevention and remember, if in doubt, refuse the transaction.

Errors

We all make mistakes, but what is important is how you deal with them. If you deal with customer complaints in a friendly and responsive manner, most errors can be sorted out without the customer needing to initiate a chargeback. Make sure that customers know how to contact you, and reply to any complaints within a working day – even if it’s just to acknowledge that you’re dealing with it.

If you spot a mistake first, don’t wait for the customer to see it – put it right and let them know.

Chargeback tips

Keep good records of customer correspondence. In the case of faulty goods, or non-delivery, customers must attempt to resolve the issue with the retailer before initiating a chargeback and you may need to prove why you have previously refused a refund.

If you have to take a manual card transaction (e.g. with an imprinter), make sure the customer signs the sales voucher and that you keep your copy as proof that the transaction was authorised.