What are Chargebacks?

What are Chargebacks?

In simple terms, chargebacks are disputed transactions. These are charges that customers dispute on their credit cards for different transactions. When a dispute is made, the merchant reverses the transaction and the customer receives his money back.

Chargebacks are meant to protect consumers from unauthorized transactions. Instead of wasting time arguing with suppliers on the legitimacy of a transaction, customers can simply initiate a chargeback transfer.

However, there are some unscrupulous customers who use chargeback to conduct fraud that this can cause a small business major losses. Take the example of a small business owner who purchases a video camera for $300. If the business decides to sell the camera at $500, it will make a tidy profit of $200. However, if a customer initiates a chargeback during the billing-and-payment circle, the business will lose both the $200 profit and the $300 spent n purchasing the camera.

There is a big difference between an honest chargeback and fraud. Here are a few things that might create a chargeback:

Your customer doesn’t recognize the charge. This may happen because your DBA name and your transacting name on their billing statement don’t match. I have called my own bank on several occasions to dispute a charge, only to realize through talking with them about the charge that it was a purchase I made with a business who’s name appeared differently when I made the purchase.

The card that was used didn’t belong to the customer. Straight up credit card theft is still quite common! Its important when running cards as credit (not so much when debit as it requires a pin number) that you check the ID of the person using the card. Instructing your clerks even just to stop and look at the name on the card presented can be very helpful. If the name doesn’t seem to match the person in front of you, or if the individual paying is obviously too young to have a Discover card, for instance, its time to ask some questions.

These are simple fixes that we can avoid by doing our due diligence as business owners. However, there are less honest chargebacks which are difficult to combat if you aren’t partnered with a company who will work for you.

Recently, a merchant in Georgia told me about an instance where he lost several hundreds of dollars on one customer. The man called from several hours away to verify that the product advertised online was in stock before he drove down. He proceeded to purchase $500 worth of food grade totes and paid with his credit card. A few days later, he called back to complain that some of the totes he purchased were not the same quality of the others. He brought 2 back and exchanged them, also purchasing $300 more of the same product. It wasn’t until a few days later that the business owner realized that the gentleman had reversed the charges on his credit card BOTH times, resulting in a loss of $800 total within a few days.

For this merchant, Square’s customer support was unwilling to help and he simply lost the money.

This sort of circumstance isn’t always something we can prevent on the front end. But with a local rep at your side, presenting signed credit card receipts, proof of receipt of the products, and whatever else you have showing they really did come in and buy those products can help you save the money you’ve lost.

Contact Central Payment today to switch to someone who can help you in the event of a chargeback!

  1. YoCo



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