IV. Chargebacks

Chargebacks can result from a number of reasons including: fraud or suspicion of fraud, cardholder not recognizing the transaction, no cardholder authorization, duplicates processing, or cancelled recurring transactions.  For most transactions, cardholders have up to 180 days to initiate a chargeback, depending upon the nature of the dispute.  In general, merchants are liable for chargebacks if they did not obtain an authorization or if the merchant otherwise failed to follow prescribed protocol (such as shipping the goods promised in working order and as described at the time of purchase).  The issuer is generally liable for chargebacks where there was an authorization obtained (for example, in the event of an undetected identity theft, application fraud, counterfeit, etc).  The acquirer only assumes liability if the merchant is unable to do so due to bankruptcy or merchant fraud.

1. Chargebacks and Fraud Losses

Chargebacks and fraud are sometimes considered synonymous by merchants, as both result in lost sales, and these losses can be a material expense for some merchants.  Those most susceptible to fraud are merchants that process volume on the Internet or other card-not-present environments and merchants selling higher risk merchandise such as jewelry and electronics. Both Visa and MasterCard intervene with merchants who demonstrate excessive chargebacks.  If these merchants continue to experience high loss rates, the associations can and may chose to fine the merchants’ acquirers or direct the acquirer to stop processing cards for a given merchant.

Merchant Account Articles

For new merchant accounts:
Tips on setting up your online Merchant account
Choosing an online payment gateway
Website requirements for an internet merchant account
Merchant Account Checklist
Tips on setting up a wireless Merchant
Tips for setting up a retail merchant account
Tips for setting up a phone or mail order merchant account

Getting the most out of your merchant account:
The Mechanics of Credit Card Transactions
What is Interchange and Assessments?
Assessing Charge Back Risk
Technology, Communication, and the Industry’s top equipment
Credit card terminals or software?
Merchant Account phone tips
Process Debit cards
Credit Card Processing at Ensight Merchant Services
Ensight Merchant Services Low Cost Guarantee on Credit Card
Ensight Merchant Services vs. Local Banks
How Phone Processing Works
How Retail Processing Works
How Wireless Processing Works
Credit Card Processing for Mac Users

Glossary of Terms