Chargeback 101: Everything You Need To Know
Product Education

Chargeback 101: Everything You Need To Know

September 16, 2022 Calculating time...

What is a chargeback?

 

A chargeback is a modification made to a merchant’s account where a reversal of a credit or payment is conducted on a previously completed sales transaction. Chargebacks can affect anyone selling online, as errors can be made by the merchant when submitting credit card transactions from cardholders.

Let us look at an example and see how chargebacks occur and how you can overcome them.  

Scenario:

Imagine you are a Moneris® merchant who runs a pizza place and uses Moneris wireless terminals. The restaurant does not perform several transactions manually as customers pay at the counter or use a wireless terminal when ordering delivery. One day, a client called to place an order for $150 for their party. The client mentioned they wanted to use their credit card to pay for the order in advance and a colleague would come by to pick up the pizza as they were busy. The merchant wanted to secure this $150 order so they performed the transaction by keying the credit card number into the terminal manually and someone later came and picked up the order.  

A few months later, the card owner checked their credit card statement and saw a $150 charge from a pizza place they did not remember purchasing anything from. They immediately called their bank and filed for a chargeback.  

In this scenario, we saw that the transaction was keyed in manually by the merchant. When taking in this order, the employee should have told the client that they would need to pay for the pizza at the restaurant through the chip reader instead of manually punching in the transaction. This could’ve resulted in a fraudulent transaction if the employee would have entered some incorrect numbers when completing this transaction resulting in some different person being charged.

Let us find out ways how we can manage chargebacks and dispute them. 

How do you manage a chargeback?  

In order to manage a chargeback, it is crucial to remember that as merchants you can set up a triggered email that will notify you when you face a chargeback and how to dispute it. To view and manage chargebacks, you can log in to your Merchant Direct account. Once you log in, you can go to the ‘Disputes’ tab and select the request you need. Also, by looking at the ‘Outstanding Chargebacks or Outstanding Copy Request Report’ you can see the most current and outstanding chargeback requests that need your attention.  

In case you face a chargeback, how can you respond to it? 

When you are in a situation where a chargeback occurs, you can respond in two ways which are to upload documents or accept the case.  

When you are uploading documents, follow these steps:  

  1. Find the case which you want to counter. 
  2. Click on the Case ID and go into the Dispute Details.  
  3. Look for the Chargeback tab. 
  4. If you see the ‘Upload Documents’ button, the case is valid for correction. 
  5. Click the ‘Upload Documents’ button. Then click Attach file to add supporting documents, review the disclaimer, and then submit to upload the file. 
  6. As the file is uploaded, the status of the case will change.  

Chargeback image 

If you choose to accept a chargeback case, you will become responsible for the chargeback as the customer will be favored and your account will be debited. To accept a case, follow these steps:

  1. Find the case which you wish to accept. 
  2. Click on the Case ID to go into the Dispute Details. 
  3. Look for the Chargeback tab. 
  4. If you see the ‘Accept Case’ button, the case is valid for you to accept.  
  5. Click the ‘Accept Case’ button and note that once you accept, you cannot undo this action. 

 Chargeback process

Specific chargeback:

 

  1. Fraud-related dispute: A fraud-related dispute is when a third party uses an unauthorized card to obtain credit or funds by misrepresentation of identity or information. For example, someone steals your credit card number. 
  2. Authorization dispute – An authorization dispute occurs when a merchant processes a transaction without first obtaining a correct and valid authorization approval from the issuer. 
  3. Processing error dispute – A processing error dispute usually starts with the merchant and can be prevented. These chargebacks come from mistakes made by the merchant during some time within the payment submission such as authorization shortcuts or misreported numbers. 
  4. Service dispute – A service dispute occurs when customers are unsatisfied with a transaction like unauthorized charges, excessive charges, failure to deliver merchandise, defective merchandise, dissatisfaction with a product, or billing errors. 

How to mitigate the risk:

 

When looking to mitigate the risk of chargebacks, try some of the following ways to reduce your risk. 

  1. Easy returns- Making returns easy by refunding customers as quickly as possible and listing clear return policies.  
  2. On-time delivery of goods to customers- Refund customers immediately if the goods/services can not be delivered by the expected delivery date. 
  3. Avoid miscommunication- Alert customers if a product is out of stock as soon as possible.
  4. Prevent fraud- Use authentication tools like card security codes (CVV) and Address Verification Service (AVS).

Overall, chargebacks can affect anyone, and knowing what they are, how they can affect you and your business, and how to respond to them can help lower revenue being lost. If you would like more details about Chargebacks, please check out our Moneris 101 (Webinar).

 

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