Chargebacks occur when a customer disputes a credit or debit card purchase and the bank reverses the charges. They serve as a consumer protection method.
When can customers request chargebacks?
Customers may file chargebacks for unauthorized charges, undelivered goods, damaged/defective items, double charges, or fraud. They should contact the merchant first before the bank.
What are the costs of chargebacks?
Merchants get hit with fees of $20-$100 per chargeback. High dispute rates also lead to fines from card networks and potential account termination.
How can merchants prevent chargebacks?
Strategies like monitoring metrics, using management software, educating customers, and creating chargeback prevention policies can help minimize disputes.
What is a chargeback ratio threshold?
Card networks set limits on the percentage of transactions a merchant can have disputed before facing fines or account closure. Staying under the threshold is key.
What is friendly fraud?
Friendly fraud refers to chargebacks filed for unauthorized purchases that the cardholder actually made intentionally. This type of dispute abuse is growing.
How can merchants respond to chargebacks?
Merchants can provide evidence to dispute illegitimate chargebacks, but have low success rates recovering funds. Prevention is more effective long-term.
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