What is a chargeback?

Most chargebacks begin when a cardholder reports a problem to the card issuer.

Table of Contents

1. Understanding Chargeback Triggers: Why They Happen
2. Chargeback Life Cycle
3. Types of Chargebacks
4. Responding to Chargebacks
5. Preventing Chargebacks

Understanding Chargeback Triggers: Why They Happen

Chargebacks can be frustrating, impacting your bottom line and time. Knowing why they occur is your first line of defense. While some are unavoidable, many common chargebacks are a direct result of situations you can control or influence.

Here are the main reasons why a chargeback might hit your business:

1. Customer Disputes (The "I Didn't Get What I Expected"):

   • What it means: A customer might claim they didn't receive the goods/services, the item was damaged, it wasn't as described, or they were charged incorrectly. This also includes "friendly fraud," where a customer genuinely forgets a purchase or makes a purchase and then disputes it to avoid payment.
   • Your takeaway: Clear communication, accurate product descriptions, proof of delivery, and easy-to-understand billing descriptors are crucial here.

2. Fraud (The "Not My Card"):

   • What it means: This happens when the legitimate cardholder claims they didn't authorize the purchase, often because their card information was stolen and used fraudulently.
   • Your takeaway: Implementing robust fraud prevention tools (like AVS, CVV, and EMV chip readers), being vigilant for suspicious transactions, and following authorization procedures are key to minimizing this risk.

3. Processing Errors (The "Oops, We Made a Mistake"):

   • What it means: These are often preventable errors like duplicate charges, incorrect amounts billed, or charging a customer before an item ships.
   • Your takeaway: Meticulous attention to detail in your transaction processing, proper terminal usage, and regular reconciliation of your transactions can nearly eliminate these types of chargebacks.

4. Authorization Issues (The "We Didn't Get Proper Approval"):

   • What it means: This occurs when a transaction is processed without proper authorization, or when a "soft decline" is ignored and the transaction is forced through.
   • Your takeaway: Always obtain proper authorization for every transaction. If a decline is received, do not retry without verifying with the cardholder or the authorization center.

5. Non-Fulfillment of Copy Requests (The "Show Me the Proof"):

   • What it means: If a card issuer requests a copy of a sales receipt or other transaction details and you fail to provide it promptly (or at all), it often converts directly into a chargeback.
   • Your takeaway: Maintain excellent record-keeping and respond swiftly to any retrieval requests. This is your chance to provide compelling evidence before a full chargeback is initiated.

Chargeback Life Cycle

Types of Chargebacks

Responding to Chargebacks

Many disputes can be successfully resolved, allowing you to keep the sale and your hard-earned revenue. Your ability to win a chargeback hinges on one thing: providing thorough and compelling information.

Think of it as presenting your case to the bank. The more relevant evidence you provide, the stronger your position.

Key Guidelines to Maximize Your Chances:

1. Act Fast – Deadlines Matter!

   • Respond Immediately: As soon as you receive a chargeback notification, start gathering your information. Banks have strict deadlines for responses, and missing them means an automatic loss.
   • Address All Claims: Carefully read the chargeback reason code and the cardholder's claims. Your response must directly address every point they've raised.

2. Prioritize Direct Customer Resolution (When Possible):

   • Proactive Refunds Save You Money: If a customer contacts you directly to resolve a valid dispute (BEFORE they initiate a chargeback), issue the credit promptly. This avoids the chargeback entirely, saving you costly processing fees and potential losses.
   • Communicate Clearly: Always notify the cardholder immediately when their credit has been processed.

3. Supply "Compelling Evidence" – This is Your Secret Weapon!

   • Your goal is to prove the legitimate cardholder participated in the transaction, received the goods/services, and benefited from the purchase. Gather all relevant data.

   Examples of Evidence:

   • Proof of Cardholder Participation:
     • Evidence that the card was physically swiped, inserted (EMV chip), or tapped (contactless).
     • Signed sales receipts (if applicable).
   • Transaction Security Verification:
     • Confirmation of Address Verification Service (AVS) match (billing address matches card on file).
     • Confirmation of Card Verification Value (CVV) match (security code on the card).
       • How to get transaction details, including the Service, AVS and CVV data that was captured on the transaction: 
         

         Print (or save as PDF) the full transaction details page in PayJunction from your browser's menu.

         

         The additional information including Service, AVS and CVV results are located at the bottom of the page.

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   • Proof of Service/Delivery:
     • Shipping tracking numbers showing delivery confirmation.
     • Service completion forms or contracts signed by the customer.
   • Clear Policies:
     • Your refund, return, or cancellation policies, especially if acknowledged by the customer at the time of sale.

Instructions to view and respond to chargebacks with PayJunction can be found here: https://support.payjunction.com/hc/en-us/articles/1260803027849

Preventing Chargebacks