Chargebacks happen when your clients request a refund of their money for various reasons, especially when making payments using their credit cards. The major causes of chargebacks include unauthorized payments of the client’s card, delayed deliveries, missed deliveries, canceled orders, and faulty products. You can run to companies that offer merchant fraud protection to help you minimize chargeback cases. However, you should also understand the steps followed by customers when filing for a refund, as explained below.
Raising A Payment Dispute
The first step when requesting a refund is that the cardholder raises concerns about the transaction they had with your company. In this step, the client challenges the transaction by contacting the bank that issued them their credit card. There are several professionals out there offering chargeback services who are better-positioned to explain to you what this step is all about. However, you should know that a client can request a chargeback for each transaction, meaning they have the freedom to request multiple refunds. The issuing bank may also request a chargeback in case of an expired card, duplicated transactions, merchant fraud, or late presentment.
Next, the issuing bank will evaluate the payment dispute raised by the cardholder to confirm its validity. The bank will simply decline the request if it concludes that it is not valid. On the other hand, if there is proof of an error from the merchant’s side, the request will go through the chargeback lifecycle. The cardholder is the issuing bank’s client. Therefore, the institution is inclined to look at things from their customer’s perception. The bank’s decision relies on the client’s claims and the available transaction data.
Issuing Of A Conditional Refund
An amount equivalent to the original transaction and any additional fees is debited from your account. You may not even be aware of the chargeback until you realize some money is missing from your account, which can get you off-guard and affect the cash flow in your enterprise.
Sending The Data
The issuing bank sends all the chargeback data to your acquiring bank. The data is assigned a reason code, which explains to the acquirer why there was a payment dispute and shows the validity of the original transaction. The acquiring bank can resolve the matter or forward it to you. It is essential to handle chargeback notices urgently, considering their stringent timelines.
Accept Or Dispute
Once the claims have been forwarded to you, you can accept or dispute them. The main benefit of disputing chargebacks is that it helps you safeguard your reputation with the issuer and minimize future payment disputes. Nonetheless, you must have substantial proof to dispute a chargeback.
Once you submit your response plus supporting evidence, one of these three things can happen – the issuer rules in your favor, the issuer rules in favor of the cardholder, or you win the case, but the cardholder requests another chargeback.
Running a business means you have to do all you can to minimize losses and maximize profits. Chargebacks can cost you substantial amounts, especially if you do not understand how to handle them. Ensure you have exemplary customer service and provide enough information for your customers.