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Chargebacks are a consumer protection tool where people can ask their bank or credit card company to reverse a payment that was unauthorized or fraudulent. Chargebacks are only meant for situations like:<\/p>\n
There are many reason codes to classify a chargeback, but they all have one thing in common: the payment was unauthorized or fraudulent.<\/p>\n
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While the chargeback system is an excellent tool against credit card thieves and fraudulent merchants, illegitimate chargebacks initiated by customers are fraud too. Known as first-party fraud or \u201cfriendly fraud,\u201d illegitimate chargebacks are on the rise and small businesses are hurting as a result.<\/p>\n
Chargebacks are NOT intended for the following situations:<\/strong><\/p>\n Customers who initiate chargebacks when they shouldn\u2019t usually don\u2019t know the consequences and often think of it as a victimless crime. But businesses lose billions of dollars each year to illegitimate chargebacks. While big companies and high-volume sellers can absorb the losses as a cost of doing business, small businesses suffer deeper damage.<\/p>\n \n When a customer initiates a chargeback, it is almost certain to be granted regardless of the circumstances. The burden is on the merchant to dispute the chargeback and prove that the money rightfully belongs with them. Overall, merchants have a low success rate when it comes to chargebacks because the process is opaque, technical, and variable. Sometimes, the process can be emotional as there may be a sense of betrayal or violation, especially between a service provider and a client.<\/p>\n Initiating a chargeback as a customer is easy. Customers have up to 6 months in some cases to reverse a card payment, while merchants often only have days to respond to the chargeback notice. This gives merchants very little turnaround time to compile evidence, summarize their argument in a professional manner, and ensure the packet meets the specifications in the chargeback notice.<\/p>\n Merchants have the burden of proving the chargeback was improper. On top of everything else, merchants are hit with chargeback fees from the payment processors, which they may or may not get back even if they win the dispute. Too many chargebacks may also negatively impact the merchant\u2019s reputation with the payment processor and lead to higher fees and other penalties.<\/p>\n Ultimately, the system needs major adjustments, but in the meantime, a merchant\u2019s best bet is to do what they can to avoid chargebacks in the first place, dispute chargebacks only when they are likely to win, and ensure they have a reliable system to dispute the chargebacks correctly and efficiently.<\/p>\n \n When a customer initiates a chargeback, the merchant will receive a notice in the mail and will have the option to accept the chargeback or dispute it. The dispute process is called representment<\/strong>. It\u2019s an internal process between the customer\u2019s bank or credit card company and the merchant\u2019s bank (or whatever bank the merchant\u2019s payment processor uses).<\/p>\n If a merchant chooses to dispute the chargeback, they must submit a dispute packet with evidence that shows the merchant is entitled to the payment. The packet must include a rebuttal letter summarizing the merchant\u2019s evidence and argument in a professional manner. The packet should meet any other specifications listed in the chargeback notice.<\/p>\n The merchant submits the dispute packet to their own bank. The merchant\u2019s bank reviews it and sends it to the customer\u2019s bank or credit card company, who then decides if the chargeback should stand (let the customer keep the money) or be reversed (let the merchant keep the money).<\/p>\n If the customer\u2019s bank decides that the chargeback should stand, then the merchant can again decide to accept or dispute the chargeback a second time. Disputing the chargeback a second time will elevate the dispute to another level: arbitration<\/strong>. Arbitration is a legally binding way to resolve disputes. But the merchant and customer are not parties to the arbitration. Instead, the parties are the banks of the merchant and customer, and the final decision-maker is the credit card company.<\/p>\n Most merchants don\u2019t let the dispute go to arbitration because the loser will have to pay a high fee (like $600 to over $1,000) so there is increased risk of losing even more money.<\/p>\n \n The chargeback notice might say something like \u201cfees in excess of $500 may apply.\u201d Some people see that and automatically give up the chance to fight for their money back. But that is not the cost of disputing the chargeback<\/b>. Those high fees listed in the notice only apply if the dispute gets to the arbitration level described above.<\/p>\n There is no additional cost to dispute a chargeback<\/strong> if you do it yourself. Merchants are charged the chargeback fee from their payment processor whether they dispute the chargeback or not. The chargeback fee may or may not be refunded if they win the dispute. Chargeback fees vary by payment processor but typically range from $20-100. Some payment processors do not have chargeback fees.<\/p>\n \n Chargeback Recoup knows how the system works and knows what the payment processors want to see. If we think you have a high likelihood of winning, we\u2019ll further increase your chances of success by preparing the dispute packet accurately and professionally and submitting the packet in a timely manner.<\/p>\n Chargeback Recoup does not represent you in the dispute process. We submit the packet for you but only you will get the decision and any further communications from the bank.<\/p>\n Chargeback Recoup takes the stress out of the process so you can focus on other things knowing that you have the highest likelihood of success to get your money back.<\/p>\n\n
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The system is designed against merchants<\/span><\/strong><\/h1>\n
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How do chargeback disputes work?<\/span><\/strong><\/h1>\n
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How much does it cost to dispute a chargeback?<\/span><\/strong><\/h1>\n
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How can Chargeback Recoup help?<\/span><\/strong><\/h1>\n