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If your business accepts credit card payments, it is inevitable that you will have to occasionally deal with chargebacks. A chargeback occurs when a cardholder disputes a transaction. While this can occur for a number of reasons, it is important that you understand how to handle chargebacks, as they can prove to be costly. A timely response is necessary, or you could lose your right to dispute the chargeback.

As a rule, you have five days from the date the chargeback appears in your current merchant accounts to inform your credit card processing company that you dispute the chargeback. You must also provide documentation that the customer received all the goods or services ordered in acceptable condition and on time within the same five days. Therefore, it is imperative that you review your merchant accounts statements on a regular basis so you preserve as much time as possible to respond to chargebacks.

Chargebacks can be costly, as you lose not only the sale but also the merchandise involved, and you could face additional fees. Generally speaking, customer disputes arise because of one of the following reasons:

  • Fraud
  • Product quality issues
  • Service problems
  • Refund issues
  • Card processing problems

While you cannot prevent all disputes from escalating, you can prevent a number of chargebacks by trying to resolve quality and delivery issues with your customers before they request a chargeback. You should also be sure to promptly inform your credit card processing company of any refund you have approved, so it can be properly processed. Refunds do not end up costing you as much as chargeback, so if a dispute cannot be resolved it may be to your advantage to simply offer to refund the purchase price.

However, if you feel that you have done everything you were supposed to do, and the customer did receive the goods or services paid for, you should promptly respond to the chargeback. As soon as you see a chargeback on your merchant accounts statements, you should immediately contact your credit card processing company to determine the nature of the dispute. In some cases, processors will automatically repond to chargebacks, particularly if the chargeback is for a transaction that has already been refunded. No matter the reason, you must respond promptly in order to preserve your right to have the chargeback reviewed and potentially reversed.

Disputes are a fact of life in business, but you can take steps to ensure that issues are resolved as quickly as possible. However, if no resolution can be reached and you can show that you did all that was expected to you, be sure to react immediately if the dispute results in a chargeback. Not only could you lose money and merchandise, but your reputation could also be damaged. Take the steps necessary to protect your business by working with your processor to refute incorrect chargebacks.