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If you are a merchant who accepts credit cards, you are likely to encounter a chargeback from a customer. A chargeback occurs when a customer asks a mastercard company to reverse a transaction. Both the bank that issued the mastercard (the “issuing bank”) and therefore the merchant’s bank will review the claim before it’s forwarded to the merchant. The merchant has the chance to dispute the claim. The chargeback process can take anywhere from one to 6 months.
What is a chargeback?
Chargebacks are a consumer protection tool that allow consumers to urge their a refund for fraudulent charges or purchases that don’t live up to standards by submitting a dispute with their card issuer.
If you notice a transaction on your mastercard account that doesn’t look familiar or run into issues with a recent order, you’ll want to (and should) dispute the transaction. Generally, you’ll have two options when disputing a transaction: refund or chargeback.
A refund comes directly from a merchant, while a chargeback comes from your card issuer.
The first step within the dispute process should be to travel on to the merchant and request a refund. this might require you to bring the item back to the shop with a replica of your receipt, otherwise you could also be ready to contact customer support and obtain a refund online.
For instance, I recently received an item from Amazon that didn’t live up to standards. The item was unwrapped and said “try me out.” i started the dispute process by directly contacting Amazon customer service via chat and explaining the difficulty . Moments later I received a refund for the item, but which will not always be the case. If Amazon wasn’t willing to credit the acquisition , i might have requested a chargeback with my mastercard issuer.
Chargebacks should be subsequent step if asking the merchant for a refund doesn’t work. You initiate a chargeback directly together with your card issuer within the hopes of the transaction being reversed.
When to invite a chargeback
There are several situations that qualify for requesting a chargeback, such as:
- Fraud or unauthorized charges on your account: If you don’t recognize a transaction and suspect it had been from fraud.
- Packages that were never delivered: you’ll receive notice that an item was delivered, but it actually wasn’t.
- Damaged or defective items: If an item came opened or missing certain parts.
- Incorrect charges on your account: the value of the item purchased was different than what you were actually charged (this happens most frequently at local businesses that enter prices manually).
Preparing to Dispute a Chargeback
Let your bank review the dispute notice. A chargeback begins when a customer contacts the issuing bank to request that the issuing bank reverse a mastercard payment to you, the merchant. Customers request chargebacks for variety of reasons, including duplicate charges for one purchase, instances where a web order never arrived, or unauthorized purchases made by someone aside from the cardholder. The issuing bank will review the claim. If the issuing bank finds the claim to be valid, it’ll temporarily remove the charge from the customer’s statement and forward the claim to the merchant’s bank.
Once the merchant’s bank receives the dispute notice, they’re going to review it. If the bank needs additional information about the transaction from you, they’re going to contact you.
Resolving the Dispute with the Customer
Contact the customer. you’ll attempt to resolve the dispute with the customer directly. Keep your communication professional. The customer could also be upset about the service he or she received, otherwise you might suspect that the customer is trying to defraud you. specialise in resolving the dispute calmly and respectfully. If your efforts fail, you’ll still dispute the claim.
- Propose an answer , like a refund, a replacement shipment, etc.
- If you reach an agreement, catch on in writing. If you reached an agreement via email, save the e-mail messages as a record of the agreement. If you spoke with the customer on the phonephone , send the customer a confirmation email confirming the date and time that you simply spoke, and therefore the resolution you reached.
Mastercard, Discover and American Express leave a 2nd round of pre-arbitration while Visa limits pre-arbitration to at least one round. A second chargeback, also called pre-arbitration, occurs when, after a merchant disputes the primary chargeback, the issuing bank pushes another chargeback on an equivalent disputed transaction for any of the subsequent reasons:
- there’s new information from the cardholder
- there’s a change to the chargeback reason
- The documentation provided by the merchant is incomplete, invalid or wasn’t compelling
When the issuing bank notifies the acquiring bank of the second chargeback, which information is passed to the merchant, the merchant is again given the chance to simply accept or contest.
If a merchant decides to continue contesting the chargeback, the acquiring bank requires the merchant provide further compelling evidence from the merchant that they fulfilled the order to the issuing bank’s cardholder, so as to win the dispute.
(Usually, the merchant is asked to supply information they didn’t provide within the first chargeback cycle, like AVS response, matching bill-to and ship-to addresses, any conversations with the customer etc.)
- This article is intended as legal information and does not provide legal advice. If you need legal advice, contact a licensed attorney.