What is a "ChargeBack?"

Occasionally, a cardholder will dispute a charge that appears on his/her monthly bankcard statement and/or it may be discovered that the proper bankcard acceptance and authorization procedures were not followed at the point of sale. If this happens, your bank or processor will notify you of the dispute and debit the amount from your settlement/deposit account. This is called a "ChargeBack."

I just received a Notification of ChargeBack, what is it and what do I do with it?

A Notification of ChargeBack is notification to you that your account was debited for this transaction. You should read the reason for debiting your account on the form, and if it is incorrect you should immediately fax supporting documentation and the Notification of ChargeBack to your processor. If the issuing bank accepts your documentation, the ChargeBack will be reversed and the amount of the disputed transaction will be credited to your account. This credit is conditional. If the cardholder disputes the reversal a second ChargeBack may be initiated. In addition, if your processor has information to contradict your claim, or if your documentation does not support your case, the ChargeBack debit to your account will stand.

Why couldn’t this ChargeBack be taken out of my reserve account instead of my regular checking account?

A reserve is set up for security purposes to protect the merchant account processor from losses due to ChargeBacks. The reserve is usually for merchants who accept non-face-to-face transactions, (phone, mail and Internet orders). The reserve is held in case of default by a merchant.

When will I be notified of a ChargeBack and when are funds removed from my checking account?

The processor will usually mail a Notification of ChargeBack when the debit is transmitted to your bank. It takes 2-3 business days for this debit to reach your checking account. Most often, you will receive notification at the same time your checking account is debited. With the optionalservice, ChargeBacks can be identified the following day.

Why did I get a ChargeBack without a prior retrieval request? When I signed my processing agreement I thought I would be given an opportunity to answer a dispute before it was charged to my account.

Not all of MasterCard’s and VISA’s ChargeBack reasons require the Issuer (cardholder's bank) to generate a retrieval request before initiating a ChargeBack.

Why is my account charged for these transactions?

When the issuing bank initiates the ChargeBack they charge your bank account.

Why didn't anybody tell me about ChargeBacks before I signed my processing agreement?

Your sales representative was responsible for informing you about ChargeBacks. However, the information is also included on your Merchant BankCard Agreement. For more information, please see our Introduction to Merchant Services.

How much do ChargeBacks and retrievals cost me?

You can expect to pay anywhere from $10 - $20 / ChargeBack. This fee is to cover expenses with processing. To reverse a ChargeBack, when it's possible, costs you nothing.

Is the risk of ChargeBack greater if I manually enter the credit card number?

If you are a general retail merchant where a card is present but do not get an imprint (manual or electronic), you may lose money through a ChargeBack when the cardholder disputes the transaction.

I issued a credit and I still received a ChargeBack, why?

In these cases for some reason the Issuer did not see the credit issued by the merchant. Sometimes the credit is issued after the ChargeBack was initiated and they ‘cross’. All you have to do is represent the item and it will be credited to your account. With the service, this is made even easier.

Can a credit card processor protect me from ChargeBacks?

There is a limited amount that a processor can do to protect a merchant from ChargeBacks. Let's face it, as a merchant you will be held responsible for any ChargeBacks.

What can I do to prevent this from happening?

General retail merchants generally do not have problems with ChargeBacks. Mail, phone and Internet merchants can minimize ChargeBacks by making sure the name they advertise under and the name they process through are the same or the processing name is in a prominent place on the receipt. Be sure to include a receipt in any product sent to the customer. Reply promptly to retrieval requests. Authorize every transaction and use the AVS if possible. If you use AVS do not ship to an address different than the address verified.

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