Chargeback Management
A chargeback occurs when a cardholder reverses a charge for goods or services, usually resulting in the return of funds to the cardholder. Chargebacks can be time consuming and costly for merchants, but National offers products and services that can help to mitigate the risk for merchants.
There are several reasons for chargebacks and, as a merchant, an investigating each claim is recommended to reduce your chargeback frequency. A few of the reasons for chargebacks are:
- The merchant failed to get an authorization for the deposit
- The card was used without authorization from the cardholder
- The transaction receipt is altered or unsigned (or PIN not obtained)
- The merchant failed to obtain card imprint (electronic or manual)
- The merchant accepted an expired card
- The cardholder believes they have been charged after canceling a membership, subscription, or multi-payment billing series
The first step in investigating a chargeback is to determine whether or not the claim is valid. This is done by the credit card issuer, usually upon receipt of a written explanation from the cardholder as well as the related documentation of the sale from the acquirer (if needed). If a chargeback is warranted, the card issuer sends the transaction back to the acquirer and charges back the dollar amount of the disputed sale. The acquirer then researches the transaction and deducts the amount of the chargeback from the merchant account and informs the merchant. If the merchant is unable to remedy the chargeback, it is the merchant’s loss. Under certain circumstances, a merchant may re-present the chargeback to its processor. If there are no funds in the merchant’s account to cover the chargeback amount, the acquirer must cover the loss, resulting in possible added fees to the merchant. Excessive chargebacks on a month-to-month basis can also lead to some hefty fines from the card brands, so minimizing the amount of chargebacks should be a priority for all merchants.
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