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Chargeback is the new black. I hear about them on daily basis (maybe it’s because of my job?), also from my friends — about how they fought for their money with an evil merchant. Of course, it’s a great way of getting back what you paid for a faulty product or service, but before you initiate it, it might be worth knowing what it means for the seller and why it’s sometimes better to ask them directly for a refund, without getting banks involved in it.

Let’s go back a few years (ok, more like 10). I bought my father a jacket as a gift. That was quite a challenge considering that I didn’t know the size. But anyway, since I was then a poor student with a credit card, it cost me a lot at that time, so imagine my surprise when I saw my bank statement with a card descriptor from that store. Doubled. I knew I didn’t buy that lovely jacket twice. Who would I even do that? So, what did I do? I called my bank. That seemed like an obvious thing to do. They said “no worries you poor student girl, we can help you out”. And so they did. €75 got back to my wallet. Too bad I didn’t know at the time that the merchant, whether they double-charged me on purpose or not, had to pay a “penalty” fee.

Credit card industry wants to keep customers happy. A happy consumer buys more. And doesn’t need to do chargebacks which can be very expensive. Consumer chargebacks cost retailers billions of dollars every year, only in the US, including bank fees, credit card fees and loss of merchandise. There are some challenging cases when the customer claims that the item was never delivered, was not described properly or buyer was simply unhappy with the product. But sometimes it’s just one step to a “friendly fraud”, which is in fact a scam.

I know what you’ll say.Some merchants are the vampires wanting your last dime, who are dishonest and hard to cooperate with. Yes, I used to agree with that at the beginning. But if you can, before initiating a chargeback, try to get the refund first. Chargebacks can cause many troubles for the merchant, as the “guilty unless proven otherwise” rule applies here.

Now a few tips for the good ol’ merchants

It is vital for every merchant to know that you need to keep your sales drafts for the disputes, from 180 days in case of MasterCard transactions, to 3 years for Visa’s.  You are given, depends on the bank, 10 days to 2 weeks to provide a valid and legible transaction documentation. In case of retrieval or soft chargeback nothing is charged. However, if you want to go on and fight with the customer, the cost is not reimbursed. No matter the result. An excessive number of chargebacks can lead to not only a potential termination of a merchant account but also severe loses to the merchant’s business.

Clear refund policy, contact information, order status update, phone number on customer’s statement, true product information can help you avoid surprises. Always contact suspicious orders or high ticket sales, be cautious of transactions from any parts of the world considered high risk, be aware of different billing and shipping address and get signed proof of delivery.

For those who treat chargebacks as a national sport, remember that doing it can lead to getting blacklisted. Over 6 mln people in North America are honored with this doubtful privilege. And since it cost $99 to get off the list, are you sure you want to risk it?

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Dominika, Account Manager

Dominika helps all PayLane clients with setting their merchant accounts.

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