Jumping into the world of the Internet can be awesome with all of the upsides but also scary. You're essentially putting your brand, your heart & soul out into the world for others to not only judge, but also potentially take advantage of.
As a business owner, you need to have the proper processes & be prepared to deal with fraud & chargebacks as well as provide support to your customers, if & when disputes arise.
What is a Chargeback?
When a customer has an issue with a charge on their credit card, they can contact their bank and dispute the charge. The bank will then make a chargeback.
A customer might dispute a charge for one of the following reasons:
- Fraudulent
- Unrecognised
- Duplicate
- Product not received
- Product unacceptable
- Credit not processed
For more information on Fraud & Chargebacks, please refer to this this article.
The most common reason for a chargeback
Fraudulent
The chargeback will be marked as Fraudulent if a customer did not authorise the charge. This is the most common reason for a chargeback and can happen if the card was stolen.
The best way to deal with a fraudulent chargeback is to try and contact the customer first. It can be as simple as the customer forgetting about the purchase, or it may have been made by a spouse, friend, or family member without the card holder knowing.
If the customer agrees that the charge was done in error, then you should tell them to contact their bank and say that they want to drop the chargeback. You should still submit evidence to the customer's bank, including the statement where the customer said they wish to reverse the charge.
If you think that the cardholder is mistaken or not telling the truth, then you should submit the following evidence to the customer's bank:
- the date and time that the order was fulfilled
- the billing information that the customer used
- the IP address and country used for the order
- shipping and tracking information for the order.
If you believe the charge was actually made using a stolen credit card, unfortunately you will need to accept the dispute.
The credit card networks assign liability for accepting fraudulent online transactions to you, the business.
Other Chargeback Types
Unrecognised
If a cardholder reviews their statement and doesn't recognise a transaction they will subsequently contact their bank to dispute it. Regardless of whether a customer thinks the transaction is fraudulent, the chargeback will be marked as Unrecognised.
This is where is it important to ensure your billing descriptors are easily recognisable.
To deal with an unrecognised charge is similar to a fraudulent, always try and contact the customer first. The customer could have forgotten about the purchase, or the purchase might have been made by a spouse, friend, or family member without the card holder knowing.
If the customer agrees that the charge should be reversed, then you should tell them to contact their bank and say that they want to drop the chargeback.
You should still submit evidence to the customer's bank, including the statement where the customer said they would drop the charge. You could include evidence such as:
- the date and time that you fulfilled the order
- the billing information that the customer used
- the IP address and country used for the order
- shipping and tracking information for the order.
Duplicate
If a customer claims they have been charged multiple times for the same product, the chargeback will be marked as Duplicate.
If you didn't charge your customer twice, then you should try to get in touch with them. You can show them that the two charges were for separate products or services. If the customer agrees that the charge was justified, then you should tell them to contact their bank and say that they want to drop the chargeback.
If the customer does not drop the chargeback after you talk to them, then you'll need to submit evidence that the two charges were for separate products or services. This evidence could include:
- an explanation of the reason for the two charges
- receipts that shows that the two charges were for different products or services
- any communication with the customer where you let them know about the two charges.
If you did charge your customer twice for the same product or service, (e.g. you made 2 orders & they took 2 orders) then you'll have to accept the chargeback.
Product not received
If the customer believes that they did not receive the goods or services they purchased the chargeback will be marked as Product not received.
Reach out to the customer first. If you can resolve the problem with your customer, then you should tell the customer to contact their bank and say that they want to drop the chargeback. You should also include evidence that the customer agreed to drop the chargeback in the response you send to the customer's bank.
If you can't resolve the issue with your customer, you should submit evidence to the customer's bank that proves that the customer received the product or service before the chargeback was made. This evidence could include:
- the date and time that you fulfilled the order
- the billing information that the customer used
- shipping and tracking information for the order
- if the product or service was digital, an activity log that shows that the customer accessed the product or service.
Product unacceptable
The chargeback will be marked as Product unacceptable if the customer feels that the product was received but was not as described. This can be easily avoided by ensuring all of your product descriptions are accurate and up to date.
Reach out to the customer first. If you can understand why your customer is unhappy with the product they purchased, you can have a chance to make it right!
If you can resolve the problem with the customer, then you should tell the customer to contact their bank and say that they want to drop the chargeback. You should also send evidence to the customer's bank that the customer agreed to drop the chargeback. If the customer didn't try to return the product before the chargeback was made, or if you provided the customer with a replacement product, send evidence of that as well.
Whether you resolve the issue with the customer or not, you should still send any relevant evidence to the customer's bank. This evidence could include:
- the date and time that you fulfilled the order
- the billing information that the customer used
- shipping and tracking information for the order
- descriptions or pictures of the products from your store that prove that they were as described.
General
A chargeback is marked as General if it doesn't fit into any of the other categories.
Reach out to the customer first. See if you can figure out what the problem is. If you can solve the problem for the customer, then you should tell the customer to contact their bank and say that they want to drop the chargeback. You should also send evidence to the customer's bank that the customer agreed to drop the charge.
If the customer doesn't want to drop the chargeback, then you should send evidence to the customer's bank that the charge was valid. This evidence could include:
- details about the products that were ordered
- the date and time that the order was fulfilled
- the customer's billing information
- the customer's IP address and country
- emails or other communication you had with the customer
- proof of prior refunds or replacement shipments.