Most chargebacks begin when a cardholder reports a problem to the card issuer. Here is a quick snapshot of the streamlined Chargeback Life Cycle in a customer-initiated dispute situation. Note: "Acquirer" refers to the "merchant bank" or merchant's financial institution. You can contact your provider if you have further questions.
Chargeback Life Cycle
- Credit Cardholder
- Issuing Bank
- Acquiring bank
- Acquiring bank
- Issuing bank
- Credit Cardholder
Responding to chargebacks
Some chargebacks can be resolved easily without the merchant having to lose the sale. This can be done by simply providing additional information about the transaction or about specific actions taken regarding the transaction. The key here is to always supply as much information as possible to your acquirer to help them remedy the chargeback. Consider these guidelines to ensure you have a system in place:
- Know the representment rights to avoid unnecessary losses for the business.
- Act promptly when customers with valid disputes deserve credits.
- When cardholders contact the business directly to resolve a dispute, issue the credit on a timely basis to avoid unnecessary disputes and their associated chargeback processing costs.
- Let cardholders know immediately of the impending credit.
- Respond to a chargeback as quickly as possible.
- Address all of the cardholders pertinent claims.
- Be sure to supply "compelling" information to prove the true cardholder participated in the transaction, received the goods or services, and benefited from the transaction.
Examples of compelling information:
- Correspondence between the cardholder and merchant that proves the merchant spoke to the cardholder or received a letter stating that they acknowledge the validity of the transaction.
- Evidence that the merchant swiped or imprinted the card, received an authorization approval, and the cardholder's signature.
Instructions to view and respond to chargebacks with PayJunction can be found here: https://support.payjunction.com/hc/en-us/articles/1260803027849
Resolve disputes timely and efficiently
Most sales transactions move smoothly through the system; they are processed, posted, and paid for with very few problems. There are times, however, when a card issuer may require additional information about a transaction and/or need to return a disputed transaction to the acquirer. On this page we'll discuss:
- Dispute resolution basics
- What triggers a chargeback?
- Merchant resources
- Learn more Dispute resolution basics
Credit card issuers and acquirers have in place an efficient dispute resolution process. As part of this process, it is highly critical that all merchants respond swiftly to copy requests and chargebacks. A copy request (also known as a retrieval request) is made by the card issuer to the business's acquirer when a copy of the sales receipt is needed for a particular transaction.
A chargeback is the reversal of the dollar value (financial liability), in whole or in part, of a particular transaction by the card issuer to the acquirer, and usually, by the merchant bank to the merchant. For the merchant business, chargebacks can be costly. The Merchant may lose both the dollar amount of the transaction being charged back and the related merchandise. Merchants might also incur their own internal handling costs to process a chargeback.
What triggers a chargeback?
Chargebacks arise for many reasons, primary among which are customer disputes, fraud, processing errors, authorization issues, and non-fulfillment of copy requests. Many types of chargebacks result from easily avoidable mistakes and omissions so, the more one knows about proper procedures, the less likely one will be to inadvertently do, or fail to do, something that might result in a chargeback. Of course, chargebacks are not always the result of something merchants did or did not do; sometimes errors are made by acquirers, card issuers, and cardholders.
Most chargeback situations arise at the point of transaction, at the time the transaction is completed, and most can be prevented with a little training. Consider these 15 tips to avoid potential chargebacks:
- Do not complete a transaction if the authorization request was declined. Do not repeat the authorization request after receiving a decline.
- If one receives a message in response to an authorization request, call the authorization center. Be prepared to answer questions. The operator may ask to speak with the cardholder. If approved, write the authorization code on the sales receipt. If declined, ask the cardholder for another form of payment.
- Make an imprint for all card-present transactions. If you have a point-of-sale terminal with a magnetic-stripe reader, swipe the card through the reader for every face-to-face transaction. If the terminal isn't working, key-enter the account information and make an imprint of the embossed information onto the sales receipt using a manual imprinter. Even if the transaction is authorized and the cardholder signs the receipt, if the receipt does not have an imprint of the embossed account number and expiration date, the transaction may be charged back to you for "no imprint" if the cardholder later denies participating the transaction.
- Obtain the cardholder’s signature. The cardholder's signature is required for card-present transactions and is highly recommended for card-not-present transactions. Failure to obtain the cardholder's signature could result in a chargeback for "no signature" if the cardholder denies authorizing or participating in the transaction.
- Make only one imprint of the card for each transaction. Making more than one imprint can lead to duplicate deposits and increase the chance of a chargeback. If one needs to redo a sales receipt because of an error, write "VOID" across the incorrect sales receipt, inform the cardholder, and tear up the incorrect sales receipt in view of the customer.
- Ensure that transactions are entered into point-of-sale terminals only once, and deposited only once. Entering the same transaction into a terminal more than once, or depositing both the merchant copy and the bank copy of the sales receipt with your acquirer, or depositing the same transaction with more than one merchant bank can all result in "duplicate transaction" chargeback.
- Ensure that incorrect sale receipts are voided and that transactions are processed only once.
- If your establishment has policies regarding merchandise returns, refunds, or service cancellation, disclose these policies to the cardholder at the time of the transaction. Your policy should be pre-printed on your sales receipts; if not, write or stamp your refund/return policy information on the sales receipt near the customer signature line before the customer signs (be sure the policy shows clearly on all copies of the sales receipt). Failure to disclose such policies at the time of the transaction will be to your disadvantage should the customer return the merchandise.
- Deposit sales receipts with your merchant bank as quickly as possible, preferably within one to five days of the transaction date, do not hold on to them. Failure to deposit in a timely manner can result in chargebacks for "late presentment"
- Deposit credit receipts with your acquirer as quickly as possible, preferably the same day as the credit transaction is generated. Failure to process credits in a timely manner can result in chargebacks for "credit not issued."
- If a customer requests cancellation of a recurring transaction which is billed periodically (monthly, quarterly, annually), always respond to the request and cancel the transaction immediately or as specified by the customer. As a customer service, advise the customer in writing that the service, subscription, or membership has been cancelled and state the effective date of the cancellation. Failure to respond to customer cancellation requests almost always leads to chargebacks.
- Keep customers informed on the status of their transactions.
- If the merchandise or service to be provided to the cardholder will be delayed, advise the cardholder in writing of the delay and the new expected delivery or service date.
- If the merchandise ordered by the cardholder is out of stock and delivery will be delayed or this item is no longer available, advise the cardholder in writing and offer the cardholder the option of purchasing a similar item or canceling the transaction. Do not substitute another item unless the customer agrees to accept it. By giving the customer notice and the option to cancel, one may help avoid a customer dispute regarding the merchandise and a possible chargeback.
- Ship merchandise before depositing transaction. Don't deposit transactions with your merchant bank until one has shipped the related merchandise. If customers see a transaction on their monthly credit card statement before they receive the merchandise, it could lead to a preventable chargeback.