In this section, you’ll find all frequently asked questions regarding chargebacks.
What is a chargeback?
A chargeback is a dispute against a transaction raised by the cardholder to their issuing bank. If the cardholder can prove that the transaction charge is false, the cardholder can then file a dispute against the credit/debit card transaction in order have the initial charged-amount refunded. When a transaction is disputed, the card issuer and the acquirer operate accordingly to the card scheme is regulated procedures in order to dictate the dispute and establish whether the charged-amount should be retained by the merchant or returned to the cardholder.
Why do cardholders file chargebacks?
A chargeback can be filed for many reasons which you can find below:
- The most common reason for a chargeback is customer dissatisfaction or if the customer suspects or spots fraudulent activity within their account.
How important is it to avoid chargebacks?
It is always best to avoid chargebacks, as each chargeback filed results in the merchant ordered to pay a fee. Find out more about chargeback fees.
Beyond potential losses in revenue, there is a predetermined monthly chargeback rate which each merchant cannot exceed without costly consequences - these include:
- Excessive fines.
- Termination of business account.
How can chargebacks be resolved with FasterPay?
After our team receives a notification of a filed chargeback we will alert the merchant with an email containing details requesting necessary actions to be taken from your side. If the merchants decided to defend the chargeback, the merchant will be required to share specific details information regarding the transaction. This information will include, but is not limited to:
- Proof of delivery.
- Product description. Or any other proof that shows that the transaction was genuine and the customer was given the services as promised. If the merchant chooses to accept the chargeback, this will need to be communicated to FasterPay. Once informed our team will issue the chargeback refund to the cardholder.
How can merchants avoid chargebacks?
There are some best practices merchants can use to avoid chargebacks, these include:
- Providing effective communication to customers.
- Creating a transparent return policy, and making it easy for customers to find.
- Ensuring that product descriptions are aligned with the expectations of customers.
- Answering customer queries quickly before and after the purchase is complete.
What is a retrieval request?
A retrieval request occurs when a credit card holder does not recognize a charge on their monthly bank statement and asks their issuing bank for clarification. A retrieval request does not have a financial aspect, but it might be a preliminary step before the cardholder initiates a chargeback. In case of a retrieval request, the merchant should provide the evidence requested by the cardholder’s bank within a short period of time, contact the customer, and clarify the issue with them or consider issuing a refund. If retrieval requests are not being handled timely and accurately, this might lead to receiving future chargeback cases.
Fraud advise vs chargebacks
Fraud advice occurs when an issuing bank marks a payment as fraudulent, usually after a consumer makes a fraud claim on a transaction.
Fraud advice should not be confused with a chargeback as it does not require the merchant to return funds. When receiving a fraud advice notification, the merchant should push to directly clarify the case with the cardholder or issue a refund.
How are fraud reports different to chargebacks?
While chargebacks and fraud report both track fraud, they have their differences. Fraud reports are typically reported within days, if not hours, of the cardholder reporting fraud. When a chargeback is filed, it can take up to three months for the merchant to be notified. Also, chargebacks encompass a variety of reasons beyond fraud such as customer dissatisfaction and not receiving goods, while fraud reports are only issued due to customers claiming fraud. Additionally, chargebacks have a direct financial impact on the merchant, resulting in a reversal of funds to the cardholder. That is not always the case with fraud reports.