Simpler Smarter Savings

Chargebacks on a credit card are a form of consumer protection against misuse and abuse of their credit card. However, chargebacks are often associated with substantial fees for the merchants, for various reasons.

The main reason is this: credit card companies are customer focused. They want to keep their clients happy, and as a result disputes usually end in the favor of the customer. When credit card transactions are conducted over the internet, they are known as CNP, or card not present transactions. Within the contract that allows merchants to take credit card payments, there is a clause stating the merchant is completely and totally liable for any occurrences of fraud.

Another reason the costs are so high is due to the loss of stock. If a merchant ships an item through overnight shipping, then the customer demand a chargeback, not only does the merchant have to pay for the chargeback fees, but they also lose the sale. The full value of the product as well as shipping costs are gone.

If a merchant acquires too many chargebacks, then credit card companies may label them as a high risk merchant, and increase the cost of chrageback fees. Unfortunately, there is little a merchant can do against chargebacks. It is usually a situation where the merchant is considered to be at fault until proven otherwise. An excessive number of chargebacks may lead to the credit card company canceling online access to them, which means the merchant would no longer be able to accept that brand of credit card.

When a merchant receives a chargeback, they must spend time collecting details of the sale and correlating all the relevant information for presentation to the credit card company. To prevent charge backs, the merchant should be aware of certain red flags when credit cards are being used. If there is a shipment of bulk orders that seems abnormally large, or certain items that seem outside of a customer’s normal purchasing habits, then the merchant should call and confirm before approval.

Often charge backs are the result of fraud, but in some cases it can simply be a malicious consumer. Against this type of person, there is little the merchant can do to protect themselves. However, if it happens numerous times with one person and a pattern begins to develop, banning that individual from the merchant’s store is an option.