What Is A Credit Card Chargeback?

A chargeback is the reversal of a charge on a persons credit, debit, or check card. This usually the result of the card holder disputing the charge.

A chargeback occurs when a person disputes a charge made to their credit card, and the money is refunded back to his or her account. The card issuer then charges the refunded amount back to the original merchant, along with an additional penalty fee. Chargebacks generally take place when previous attempts to correct the problem with the merchant has been unsuccessful and the customer makes an appeal to their financial institution or credit card company to get their money back. Once a complaint has been made, a short investigation is conducted and the money is posted back to the cardholder's account after the dispute resolution process has been completed.

The most common situations resulting in a chargeback include: a cardholder failing to recognize the transaction description on their credit card statement and disputing the charge, being charged more than once for the same item or service, a charge being posted to the wrong person's account (usually the result of entering the wrong account number while processing the transaction), being overcharged, dissatisfaction with the product or service that was charged, not receiving the products ordered or receiving a product different from the ones that were ordered, or charges that were not authorized by the cardholder (usually the result of theft or fraud). Customers are usually encouraged to try to resolve the problem with the merchant before requesting a chargeback. If the issue is not resolved after taking the complaint up with the merchant, the customer will then call their card issuer to dispute the charge and ask that it be charged back to the merchant.

With the growing popularity of e-commerce, online shopping and auction sites such as E-bay, less and less credit card transactions are being done in person. As a result, more credit cards purchases are being disputed and more chargebacks are taking place. In addition, the increase of identity theft and credit card fraud has resulted in a surge of contested charges. Furthermore, ATM cards have been replaced with debit and check cards issued by Visa and MasterCard, allowing more people to charge purchases than before. As we move closer towards being a "cash-less" culture, the amount of chargebacks will continue to increase in the near future.

This increase in credit card disputes worries merchants a great deal, and with good reason. Merchants usually have to pay an additional charge for every chargeback they receive. In addition to lost revenue, a business can actually lose their merchant account and their ability to accept credit card payments entirely if they get too many chargebacks. Therefore it is very important that merchants take steps to reduce the number of disputed credit card charges that are made. There are some very simple things businesses can do to protect themselves. Merchants should first make sure that the name that shows up on the charge is the name that they do business with to prevent disputes from people who may not recognize the charge. In addition, businesses should make sure all credit card transactions are properly processed to avoid billing errors. If you are shipping a customer's order, it is strongly encouraged that you ship to the same address that the credit card is billed to and to use a tracking service to make sure that the item was delivered. It is also imperative to have a strong security policy in place to ensure that the person using the credit card is the authorized user, and that the card or card number is not stolen.

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