What You Don’t Know May Be Hurting You | What is a chargeback? A Detailed Explanation

If you have already got yourself an e-merchant account that allows you to accept credit cards for payments, then that’s a big step forward. With your new account, you can safely and conveniently go about online transactions in a cost-effective and professional manner. But there is probably one more thing to consider – reducing your chargebacks!

So, what is a chargeback?

Basically, a cardholder receives their credit cards from banks. The bank from which the card is obtained is typically called the “issuing bank.” A chargeback simply refers to a form of customer protection provided by the issuing bank. This protection allows a cardholder to file a complaint in the event of a fraudulent transaction on their statement. As soon as the aggrieved customer files such a complaint, the involved bank will swiftly move to investigate the contested transaction.

If the transaction is indeed proved to be fraudulent, the bank has the authority to return the original value to the customer. Try to look at it from the merchant’s point of view. A customer comes in and you provide him or her with certain services.  The customer then makes a payment using a credit card. Later, the transaction is deemed fraudulent and what follows is that the customer’s bank takes back the entire value of the transaction from your account, plus a small fee. You realize that as the seller, you don’t only lose the value of the services or products offered but also the fee incurred for payment processing, currency conversion commissions, and the chargeback penalty (chargeback penalties range from $0 to $100 depending on who you bank with).

On the other side, if the cardholder’s claims are proved to be true, additional processing fees may be charged but no refunds will be made.

A good idea, in addition to applying for chargeback protection, is to avoid chargebacks whenever possible. Not only are they costly to the business but merchant accounts that attract too many chargebacks may be labeled as “risky” by credit card companies. This can severely damage the image of your business. Moreover, “risky” accounts often attract higher commissions. That’s why every merchant strives to avoid being labeled risky.

While it may be extremely difficult to completely avoid chargebacks, there are always things you can do to keep your business safe. An excellent idea that has proved beneficial to most e-merchants is to understand your industry better. This should allow you to stop fraudulent transactions before they happen.

Let us help you get Chargeback Protection today!

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