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A Merchant’s Guide to Chargeback

Chargeback Guide

Chargeback Guide: A Merchant in a high-risk business always prioritizes chargeback if he cares about his business. Because a chargeback percentage decides whether he would still be in the online business or get a red card from merchant account service providers. Navigating the chargeback process is painful and time-consuming for any merchant.

Chargeback, if you may not know is a return of funds into the buyer’s bank account, a line of credit or credit card. In other words, a chargeback is a demand by the credit card issuer from the retailer to make-up for the loss on a disputed transaction.

All chargeback disputes begin when a cardholder files a dispute on a transaction with their issuing bank. (Usually, a cardholder has 45-180 days to dispute a transaction depending on the card association). The issuing bank then reviews the claim and determines its validity, which takes anywhere from 2-6 weeks. Visa gives issuing banks up to good 30 days to review. If valid, they would then forward it to the merchant’s acquiring bank or payment processor, who notifies the merchant.

The merchant is notified simultaneously that they’ve received a dispute from the cardholders, and that the acquiring bank has debited funds from the merchant account to reimburse the cardholder for the transaction, and also to cover the fees for investigating the chargeback. The reimbursement exists as a temporary credit for the cardholder and can be later transferred back to the merchant should they win the chargeback dispute.

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Parties involved in the Chargeback Process:

The Customer – The customer is a cardholder who purchases from the merchant. There are many reasons for the customer to file a dispute if he sees an unrecognizable transaction or does not recognize the billing descriptor. Each card network guarantees zero-fraud liability to its customers.

Issuing Bank The issuer provides payment cards to the cardholder. Some examples include credit and debit cards. The issuer is the underwriter of the account. That means it is responsible to disburse funds to the merchant from the customers.

Card Network Visa, MasterCard, American Express and Discover are the four major card networks globally. Each of them provides a transfer facility between issuers and acquirers. They also provide settlement facility between both the parties.

Acquiring Bank The acquirer is the party responsible for acquiring authorization through the card network. Acquirer receives funds on the merchant’s behalf from the customer’s issuing bank. The acquirer settles the funds collected from the processing fees, network fees, and interchange fees.

Merchant Account Processor The merchant account processor is a service provider that partners with an acquirer. It provides services as process payments on the merchant’s behalf.

Merchant’s Commercial Bank Account The acquirer receives the funds from the issuer through the card network’s settlement process. The funds are deposited to the merchant commercial bank account. The merchant commercial bank account is the destination of funds transferred from a cardholder.

The Merchant Company or a business who provides goods or services in exchange for money.

Merchant Loses to Chargebacks – Losing to chargeback dispute is worse than chargeback itself. Because merchants just don’t lose the amount that is disputed but also loses money as chargeback fees and in most cases product also. Moreover, the merchant loses time from fulfilling delivery and more.

Preventing Chargebacks – Merchants honesty is a virtue, which reduces chargebacks to 80%. This is providing quality to the customers, in order to prevent chargebacks merchants should consider the following points:

  • Excellent customer support
  • Proper return policy
  • Accurate product descriptions and billing
  • Accurate results of the product or services.
  • Have a conversation with the customers including documents.

For more information on chargebacks and how to prevent them, contact us at: +1 (888) 622 – 6875 or visit charegbackexpertz.com and check our services or you can dial our number to get an expert to assist you.

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