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What are chargebacks?

Posted by Alex Neir on Thu, February 24, 2011 @ 01:40 PM

What are chargebacks?

A chargeback is the process in which a customer contacts their credit card issuing bank to dispute a charge on their credit card bill. All credit card holding patrons have the right to initiate a chargeback as it is part of the contract between the issuer and card holder. The chargeback process was established to protect card holders from the liability associated with stolen credit cards.

The chargeback process begins with the customer contacting their bank to dispute a charge. A dispute may arise from any number for reasons, as few are - an unknown or unauthorized charge, product delivered did not match what was advertised, the list goes on and on. Once a chargeback has been opened with  the card issuing bank an investigation take place. The bank will call the merchant involved with the charge to determine the nature of the issue. In the case where the charge is disputed due to an unauthorized charge the merchant will be given the opportunity to prove that the charge was authorized. Typically the merchant’s best defense is a signed sales receipt or credit card authorization for the transaction. If the signature on the sale receipt or authorization matches the signature on file with the bank the merchant will usually win the dispute.

Card holders or customers have up to 18 months from the time the charge shows up on their statement to chargeback the transaction. So, it is VERY important for merchants to hold on to their sales receipts and authorizations for 18 month from the time of the sale.

Tags: Merchant Account Education, Chargeback Defense, Chargebacks