| Sitemap Client Login Affiliate Login |
|
|
|
|
 |
|
|
|
|
|
|
|
|
|
|
ArticlesUnderstanding ChargebacksWhen running an online business, there is typically one thing on our minds, and that is how to keep the profit margin high. Budgeting time and resources is an art in itself, but an oft-overlooked production cost can severely hinder the efforts of a business to make money by taking it out of the hands of business itself. These money moles are known as chargebacks.So what exactly is a chargeback? A chargeback, defined simply, is a billing dispute. A customer may claim that a company providing a service did not deliver what was promised, and attempt to get their money back. Or, a single transaction may have been processed more than once, resulting in a double charge. Such occurrences are only a few examples of events that may initiate a chargeback. When one of these events occurs, the chargeback process is initiated. This can be a real burden for companies, especially smaller operations who may not fully understand how to protect themselves from being hit, or have the money available to cover chargeback expenses. Credit companies like Visa and MasterCard have specific rules and regulations regarding chargebacks and the procedures that surround them. Each chargeback has what is known as a reason code, which is used by the bank to justify the chargeback. Each reason code has a specific set of criteria that must be adhered to in order to justify the reason code, and therefore legitimize the chargeback. If no reason code criteria can be satisfied, the chargeback cannot be processed, and the customer is simply out of luck. The chargeback process involves several stages. The first stage is Presentment, which merely involves the credit card company (acquirer) being credited for the transaction amount and the customer’s bank (issuer) is debited for that amount, finishing the transaction. The second stage is the Chargeback stage. In this stage, a disputed charge is sent through the acquirer's network back to the acquirer from the issuer. This basically means that the sale of a product has been reversed. At this time, criteria are evaluated and chargebacks are legitimized by the use of reason codes. If a chargeback is rejected, the process moves to stage three, or Representment. Chargebacks may be rejected if the reason is invalid, reason criteria was not met, documentation or paperwork is missing, or an error in the transaction occurred. In this case, the chargeback is sent back to the issuer from the acquirer. The issuer may then try to correct any errors that may have occurred in submitting the chargeback, and "e-present" the dispute to the acquirer. If the chargeback still cannot be legitimized, arbitration can be requested by the issuer. Arbitration is the final stage of the chargeback process. This occurs if Representment is disputed by the issuer; in which case, the Visa/MasterCard Arbitration Committee will sit down with both parties to review all information and documentation, and discuss who has final liability over the transaction. The committee's ruling is final in most cases. In some cases, pre-arbitration can be filed, if the requesting party wishes to submit additional information or change the reason code. The chargeback process is closely regulated by credit companies. The chargeback process typically carries a timeframe, which can be between seven and 120 days, during which the chargeback can be filed. Chargebacks filed after the time period will not be accepted, though occasionally there are exceptions. Some credit companies also require that a waiting period elapse before the chargeback can be filed. In addition, before issuing a chargeback, the issuer must make every attempt to ensure that the right to issue a chargeback is only exercised when the cardholder has been billed and refuses to pay the transaction amount. Credit companies also require a company's chargeback ratio to be under a certain amount. This means that for every specified number of transactions that occur, only a certain percentage can be chargebacks. If the chargeback ratio rises above this threshold, companies are likely to be subjected to heavy fines and possible legal action from the government. Merchant businesses are also subject to chargeback fees from the acquirer whenever one is filed; individually, these fees may be small, but they add up very quickly. Avoiding chargebacks can be tricky; however, there are plenty of ways to reduce them. Perhaps the biggest and easiest way to prevent chargebacks is to ensure your transactions are not fraudulent. Using Address Verification Systems as well as Card Verification numbers are excellent tools for this. Also, beware of any unusually large orders, or orders from foreign countries or companies that may have a reputation for fraud. Another helpful tip when reducing chargebacks is to always make sure your refund and return policies are clearly outlined where the consumer can see them. This will help ensure that the customer is following proper procedures and taking the right amount of responsibility for the transaction. Chargebacks are one of the most pressing challenges facing the world of e-commerce. Chargeback fees, fines for excessive chargebacks, lost revenue, and potential legal fees can be detrimental to any business. Krisi Williams is the Director of Chargebacks & Billing Disputes for EC Suite; a leading provider of credit card processing, affiliate management, wholesale bandwidth, and content protection and other e-commerce solutions. 
|
|||||||||||||||||||||||||
