Chargebacks - What they really mean and how to prevent them...

Updated: Nov 6

A chargeback is a process that allows a customer to dispute a charge on their credit card bill. It’s usually initiated by the cardholder, but it can also be initiated automatically by the bank if it detects suspicious activity [click here to learn how FrenzoPay takes measures again suspicious activity and fraud]. A chargeback amounts to a customer asking their credit card company to reverse the charge on their statement and might involve them asking for a refund or simply notifying their bank not to process future payments from your business account.




A chargeback may seem like an indication of fraud, but they’re actually quite common and happen for many different reasons. In fact, over 25% of businesses will experience at least one chargeback in any given year. Because of this, it’s important to know what they are and how you can prevent them from happening again.


What does a Chargeback mean?


A chargeback is when the cardholder disputes a charge by contacting their credit card company and asking for a refund. It’s often accompanied by a claim of fraudulent activity, but it’s important to understand that chargebacks are different from a fraud investigation. When a customer initiates a chargeback, they’re essentially giving their credit card company permission to take money back from the retailer — which in this case is you. A chargeback amount is a difference between what the cardholder paid and what you paid for the transaction. The cardholder’s credit card company will then notify you of the chargeback and process the money from your account. As a business, you’ll need to prove that the charge was legitimate and that you did nothing wrong. If you don’t respond to the chargeback or don’t win the dispute, the money will be removed from your account.


Why do chargebacks happen?


Chargebacks are initiated by the cardholder, but their reasons vary depending on the situation. The most common reasons include: - The cardholder claims to have not received the item they ordered. - The cardholder claims to have not received the item they ordered. - The cardholder claims they did not authorize the purchase. - The cardholder claims the item they received was significantly different from what was advertised. - The cardholder claims there was a technical error that resulted in the cardholder being charged. - The cardholder claims to not have received the item by the promised delivery day.


How do you prevent chargebacks?


Preventing chargebacks begins with good customer service. Once a customer has made a purchase from your business, it’s up to you to make sure they’re satisfied with their experience. This includes resolving any issues quickly, making sure your items are accurately described, and shipping items as quickly as possible. If you have an existing chargeback, it’s important to first try to understand why it happened. If the chargeback is related to a quality issue or a product that wasn’t received, it’s important to fix the problem before it gets worse. If the chargeback is the result of a customer who simply changed their mind or ordered something they didn’t need, there’s not much you can do. While it’s possible to get a chargeback removed by making a representative call to the cardholder’s credit card company, it’s unlikely to be successful.


The Final Takeaway


Chargebacks are a part of doing business, but they don’t have to be a part of losing money. The best way to protect yourself from chargebacks is to offer great customer service. This includes timely communication with customers, accurate product descriptions, and quickly resolving any issues that might come up. If you do encounter a chargeback, be sure to take a close look at what caused it. If it’s a result of a genuine mistake, it’s important to respond to the chargeback and prove that you were not at fault.


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