What Are Chargebacks and What do They Mean for You and your Business?

“PROTECTING THE CUSTOMER”

by Contributor

(Jun. 10, 2019) — You may have just received your first chargeback, or you may just be wanting to brush up on your knowledge. Either way, it is necessary to understand what chargebacks are and why they are important to you as a business owner. In this article you will learn everything that you need to know about chargebacks.

Chargebacks: A brief history

Chargebacks were brought into legislation in the 1970s as a way to protect people with credit cards. If a person with a credit card was targeted by fraud, a chargeback could be used to ensure that their money was safe. This is still true to this day, and if a customer thinks that their card is being used fraudulently then transactions can be disputed, and the money spent through the fraudulent activity can be refunded. This works slightly differently than a normal refund, as the other person in the transaction does not send the money back themselves. Instead, the victim of fraud can go to the bank directly and ask for the money to be moved back into their account.

Why are they used?

This boils down to protecting the customer and users of credit cards. Credit cards have been used for fraud in many different ways over the years. By providing an option for customers to have peace of mind when using their card it means that they will be more likely to use them. This is beneficial to the customer as they can get the benefit of a credit card without risk of losing money, but is also of benefit to the bank which makes money from card sales. The more safe and happy customers are, the more money they will make. In addition, there is a clear benefit for the user if there is an option to get their money back due to fraudsters.

There are a few key reasons where consumers should look into using a chargeback. One of the key ones is if a customer’s identity is used fraudulently and is stolen. If this is the case and transactions have been made with a credit card that is not yours then this is an ideal situation to use a chargeback. The customers will be able to get their money back, and if an exploit was found to have been used to get the details the company can put actions in place to stop the issue from happening again.

Issues that may look like fraud should always be checked first by the merchant though. It may be that a payment was wrongly perceived to be fraud and actually a mistake was made by the seller of a product for example. In this case a refund would be more appropriate than a chargeback. Refunds take significantly less work and will also get the cash back to the merchant faster than if a chargeback was used. In fact, trying to file a chargeback if you are not happy with a purchase is a form of fraud in of itself.

 

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