Chargebacks – Who Has Your Back?

Aug 12, 2014

A Good Intention

The term chargeback refers to the return of funds to a consumer when that customer reverses an order made for goods and services from a merchant. The original intent of chargebacks was to shield consumers from dishonest merchants, who might be offering non-existent or shoddy goods and services. It also benefits the customer in instances of identity theft, where there is the assurance that funds will be returned following an investigation. Another expected benefit was that merchants would be encouraged to supply products of a high standard; ensure that their customer service practices are accommodating to and considerate of the consumer, and provide timely refunds in the case of genuine errors.

Take Action – Don’t Just Hope for the Best

It is imperative that merchants protect themselves against chargebacks in the first instance and then against negative repercussions when chargebacks are effected. Since only a meager 21% of chargebacks lodged worldwide end in favor of the merchant, one mechanism available is coverage from chargeback insurance providers. This specifically provides coverage that protects merchants who accept credit cards against fraud in a transaction where the credit card is used without the cardholder’s authorization and reimburses the merchant for the cost of a stolen product or service and the loss of profit.

To guard against possible chargebacks one pertinent piece of advice is to provide excellent service every time. This means from the first contact is made regarding proffered goods or services, through the purchasing process, and then afterward if complaints or that dreaded refund request arise.

Never Without a Reason

Also vitally important is identifying why the refund was requested, since the consumer is not at liberty to request a chargeback on every whim. Chargebacks are allowed in four particular cases. These are:

  • technical chargebacks which are issued for reasons including expired card authorization, non-sufficient funds, or bank processing errors;
  • clerical chargebacks which occur due to errors on the part of the merchant, where there is duplicate billing, an incorrect amount being billed, or a promised refund not being issued;
  • quality-related chargebacks which arise when a customer claims the goods or service were never received, or they were received in a defective state or later than promised; and
  • fraud-related chargebacks which come into play in cases where there is a suspicion of identity theft or when a customer’s credit card was charged without their prior authorization.

The best advice that may be given to merchants is to ensure that there is documentation and proof of the orders being made. This can be a print or e-mail record of the charge if it is done online. If credit card orders are taken over the telephone, update the company’s records to show the information. For walk-ins, require that cards be swiped and request a signature to compare with the signature on the back of the credit card. When there is no signature, request identification to verify that the purchaser is in fact the cardholder.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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