What is a Credit Card Chargeback?

While you already know that accepting credit cards and debit cards is a great move that can benefit your business, you must also consider some of the risks that come with accepting credit cards as a payment option. One such risk is the chargeback, which is a type of transaction you must be aware of as a merchant.

Understanding a Credit Card Chargeback

A credit card chargeback occurs when a cardholder contacts their issuing bank to dispute a charge on their account. The bank then explores whether or not that charge was fraudulent or unwarranted. A customer may claim that they did not receive an item they ordered, were billed improperly, or they may simply feel as though the product or service they received was not as advertised. In any case, the issuing bank provides the business an opportunity to respond to this claim.

Should the business be unable to provide evidence that it was a real, credible transaction, the issuing bank then takes the amount of the charge and refunds it to the cardholder’s account, along with any additional chargeback fees.

Credit card chargebacks can therefore become very costly for your small business, meaning you should make it a priority to avoid them in the first place.

How to Prevent Chargebacks

When your business accepts credit card payments, you are opening yourself up to the possibility of chargebacks. However, there are ways to reduce the impact of chargebacks on your business. The following are some best practices to avoid chargebacks from happening in the first place:

  • Use a name that your customers will recognize as your credit card descriptor. Often times, chargebacks happen when a cardholder does not know where a charge came from when they see it on their credit card statement.
  • Offer refunds to your customers. Cardholders are less likely to file a claim with their issuing bank if they are unsatisfied with your product or service if you offer to accept refunds or returns.
  • Have good customer support in place. If customers are able to reach out to a representative with any questions about their transaction, you have the opportunity to rectify issues or explain their charges before they escalate to a chargeback.
  • Look for signs of fraud. Frequent use of stolen or fraudulent cards at your business or online payment gateway puts you at greater risk of chargebacks from the rightful owner of those cards.

Want to learn more about credit card processing, credit card chargebacks and how they might impact your business? Reach out to the team at Swift Payments. Our representatives are available to answer your questions about credit card processing and more. Call 1-855-625-2791 today!



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