Reasons Your Merchant Account May Receive Chargebacks

Card payment disputes can hurt your business by costing you money and time trying to settle them. If you have a bunch of chargebacks on your merchant account, it may make you lose out on working with payment processors such as payment cloud.

To prevent further consequences, understand the reasons why chargebacks happen and how you can effectively stop them from harming your business.

When a customer files a “product unacceptable” dispute

When a customer receives the product or service and claims it doesn’t match the description of what they paid for or that it arrived  damaged, they can file a dispute known as “product unacceptable.”

You can resolve the issue with the customer by asking them to return the product and offering to replace it. If your customer agrees, remember to send evidence that the problem is resolved. If not, prepare sufficient evidence to prove that the customer received the product as described.

The downside is that your customer can also use this reason if they didn’t read the descriptions well or misinterpreted the ad.

When the customer doesn’t receive the product

When a customer claims that you didn’t deliver the product they bought, the chargeback is marked as “product not received.” A customer may also ask for a chargeback filed under a similar if the customer isn’t satisfied with the product or service provided because it doesn’t match what was advertised.

The best course of action is to contact the customer and resolve the issue. If that doesn’t work and the customer still claims they didn’t receive the product, submit evidence proving that you delivered the product or service. Ensure to provide shipping and tracking information or an activity log if your business is mainly digital.

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Fraud

The chargeback might be marked as fraudulent if the cardholder didn’t authorize the transaction. Chargeback fraud is also referred to as friendly fraud. Fraud is among the most common chargeback reasons. It is also the most difficult to dispute from a business’s perspective. It usually occurs when a third party uses stolen card details to make a purchase.

So, when a cardholder notices on their bank statement that someone used their card without them knowing, they contact their issuing bank and report the fraudulent charge. Then all they need to prove is that someone else used their credit card without their knowledge, and they will be compensated, and your merchant account will be issued with a chargeback.

When the customer claims they were charged twice

When the customer buys a product or service from your business, and they are charged twice for one item, they will raise a dispute, and the chargeback will be marked as “duplicate.”

If the customer is right about being charged twice, it would be best to accept the chargeback. But if the customer has been charged for two different products and is disputing that it’s the same item charged twice. It means that you need to submit sufficient evidence showing that the two charges are for different items.

It’s always advisable to save all your transaction details in case of chargeback disputes to ensure that you have sufficient evidence when it happens.

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About the Author: Cory Weinberg

Cory Weinberg covers the intersection of tech and cities. That means digging into how startups and big tech companies are trying to reshape real estate, transportation, urban planning, and travel. Previously, he reported on Bay Area housing and commercial real estate for the San Francisco Business Times. He received a "best young journalist" award from the National Association of Real Estate Editors.

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