- What are Chargebacks?
- The Chargeback Process
- Recommended Documentation for Re-presenting Chargebacks
- Preventing Chargebacks
What are Chargebacks?
A chargeback occurs when a customer contacts a credit card issuing bank to dispute a transaction. The card issuer will contact us to get more information about the transaction, and we will request any supporting documentation from you to assist us in challenging the dispute. The cause of the disputes can vary from the customer being dissatisfied with their purchase, a customer not recognizing the transaction, a customer not authorizing the transaction or a customer reporting a fraudulent transaction.
The timeframes and procedures surrounding the dispute process are managed by the credit card networks (Mastercard, Visa, Discover, American Express). We do our best to help re-present your case to the card issuer who will determine the outcome of the chargeback.
When a chargeback is received, you’ll receive a chargeback reason code from the issuing bank that gives a reason for the dispute. A list of dispute reasons by card issuer is available here: Chargeback Reason Codes
The Chargeback Process
For most transactions, cardholders have up to 120 days from the transaction date to dispute a charge. At that point, we will notify the merchant of the dispute and the merchant has 30 days to supply documentation to re-present the transaction. After the case is re-presented, the funds will be credited back to the merchant and the transaction is sent back to the card issuing bank. The card issuing bank has up to 45 days to challenge the transaction further.
- A customer disputes a transaction by contacting their bank.
- For most transactions, cardholders have 120 days from the transaction date to dispute a charge.
- The card issuing bank provides a provisional credit to the customer for the transaction amount.
- Merchant Notified of Chargeback Received
- The chargeback amount is debited from the merchant’s account and the merchant is notified via email using the email address where settlement summary emails are sent.
- Chargeback details will also show up in the merchant portal which can be accessed at https://merchantportal.iclasspro.com.
- The merchant will be charged a non-refundable $25 chargeback fee.
- Merchant Response
- The merchant typically has 30 days to respond to the case by providing supporting documentation. The documentation is passed on to the card issuer to make a determination. The merchant will be credited back to the chargeback amount. The card issuer has up to 45 days to respond. If the documentation is found satisfactory, the chargeback is declined and the customer will be charged again for the sale. If the documentation is found to be unsatisfactory, the cardholder will keep the funds and the merchant will be debited again for the funds.
- The merchant can choose to “accept” the chargeback and allow the funds to be refunded to the cardholder. The chargeback will be automatically accepted if the merchant does not reply by the reply-by date.
Recommended Documentation To Re-Present a Chargeback
Providing sufficient documentation and keeping thorough records is vital to winning chargeback cases. We recommend the following documentation each time when re-presenting a disputed transaction:
- Proof of billing authorization
- Signed receipt
- Recurring billing agreement or contract
- Proof that customer utilized services or received merchandise
- Attendance records
- Proof that a refund was processed
- Transaction Receipt
The best strategy for chargebacks is prevention. Below is a list of general best practices to help prevent chargebacks.
- Give Great Customer Service & Post Return Policies Clearly
Many customers will go to a business first to resolve a dispute. Making it easier for customers to contact you rather than disputing the transaction with their bank is key to prevention because it gives you an opportunity to address and resolve the customer's concerns before a chargeback is initiated.
- Use a clear DBA (doing business as) name that your customers will recognize. The DBA name is what will appear on cardholder statements. If you're unsure how transactions currently show on credit card statements, please contact us.
- Ensure that you have the correct customer service phone number showing on cardholder statements. This is important in case the customer has a question about the charge.
- Swipe Cards When Possible
When the customer is present, swipe the card when possible and get a signature. This makes it easier to prove that the customer authorized the payment.
- Use Address Verification Service (AVS)
AVS works by comparing a customer's name, address and zip code with the information on file at the credit card company. Mismatches could indicate that it's a fraudulent transaction. iClassPro will automatically attempt to get an address match, however, it will not decline the transaction due to a mismatch. You can set the gateway to automatically decline due to mismatch to enforce stricter requirements. If you need help with this, please contact us.
Communicate with customers about their transactions. Visa recommends sending a billing reminder 10 days prior to the transaction for recurring transactions. Also, emailing transaction receipts can help customers recognize charges on their credit card statements.