Author: John Conde (Google+)
Nobody goes into business to lose money. You work hard for every penny, and every penny counts. To have that taken away from you months after a sale was completed is not only bad for business but extremely frustrating. Too many chargebacks usually spells doom for an online merchant.
The best tools for avoiding a chargeback are not available for online merchants. Retail-style businesses can perform certain actions that render them virtually bulletproof to chargebacks (they're still vulnerable, so don't be too envious just yet). They can either swipe the customer's credit card through a processing terminal or get a manual imprint of the card. Plus they can get a signature on that receipt at the time of sale. All of these methods verify that the customer, merchant, merchandise, and credit card were present and satisfactory at the time of sale. It's pretty hard to dispute that.
So what is an online merchant to do? Since giving up is not an option, education and prevention are an online merchant's best weapons. Having some basic policies and procedures in place can significantly reduce the number of chargebacks your business will receive. In this article, we will discuss the realities of chargebacks and identify some strategies that will lower your potential for needing to deal with them.
A chargeback occurs when a customer contacts a credit card-issuing bank to initiate a refund for a purchase they made on their credit card. The reasons why chargebacks arise can vary greatly but generally, they are the result of a customer being dissatisfied with their purchase.
The customer may or may not have contacted the merchant about remedying this situation ahead of time. They may even be completely wrong. However, responsibility falls to the seller to ensure that the transaction goes smoothly and the customer is satisfied. A failure somewhere within the fulfillment process, including at the customer service level, can lead to a chargeback.
The chargeback process is a largely unknown to merchants and can often be a cause of frustration. To assist merchants in understanding the chargeback process, let's take a look at the chargeback process used by Visa and MasterCard. American Express and Discover Card use a similar process. However, because they do not issue their credit cards through member banks, there are fewer steps involved and the process is usually faster. The process is as follows:
As you can see, there are multiple steps involving multiple parties, and each step requires the responsible party to dedicate a certain amount of time to its management. The resolution of a typical chargeback can take anywhere from six weeks to six months. If each party takes the maximum amount of time to complete a responsibility, it's not hard to see how a chargeback can seem to drag on forever.