Do you know what chargeback meaning is? What is chargeback definition? If you are a newer e-commerce business setup, you should get an insight into chargeback basics. We may term it as and the reversal of credit card payments that are taken directly from banks. If you are a merchant, it may be something frustrating for you. You may call it a threat to your business, your goodwill and trust. If you are a customer, a chargeback has a different meaning for you. You may term it as a shield that offers you protection from dishonest business owners. You know that the two chargeback’s outlooks stand at odds. It is where there is something complicated. In this article, I shall provide you with information about the fundamental nature of chargeback with particular reference to Canada.
History of chargeback
Till the early 70s, the credit card was not popular in the US and Canada. Its reason was the fear of people that a credit card could be misused and stolen. It may be used for unauthorized transactions, and the owner may face a loss. There were some there complaints about unscrupulous merchants using card numbers for fraudulent payments.
The basic concept behind chargeback was the card holder’s protection. It was a safety net to ensure that the card holder’s money was safe. With a chargeback, the cardholder could now quickly get back the money. There are new regulations to alleviate fears among consumers. Charge backs are the backbone of the original credit card processing system.
When to use chargeback?
Today the credit cards have become part and parcel of our life. We don’t even have n understanding that we have chargeback protection and yet don’t know that what its procedure is. If you fall victim to identity theft, you can file a chargeback. If you have made fraudulent purchases, you may go for a refund. You need to contact your bank immediately to get back stolen money and avoid additional losses. It is the only situation when you reach your bank. You may contact you, merchant, first.
If you contact your merchant, you can solve the issue without the involvement of your bank. It may be an accidental matter and merchant may pay you back. In this situation, there may be perhaps no complication/ if the merchant is not willing to pay the money back. You cannot go for mere cash back. It will be like shoplifting.
Chargebacks is only happening for creditcards, and debit cards dose not have chargeback options as you can not process CNP transactions with debit cards.
Why do you need to request a chargeback?
There are situations when you need to request a chargeback. You should not claim it just you are suspicious. You may go for a request in the following circumstances.
- When a fraudulent payment was made from your credit card, in this situation, you need to contact your bank immediately.
- When you made a purchase, but you were not satisfied with the delivery, in this situation, you need to contact the merchant and discuss the matter. If you are not satisfied, you may then file the case to your bank and request a chargeback. It may be a lengthy process.
Some people consider you chargeback and friendly fraud as synonyms. When you take advantage of your chargeback facility in the wrong way, it may be a friendly fraud. You deliberately blackmail the merchants by claiming that your purchases were fraudulent. The chargeback, in the real sense, is your protection. The regulation is not in harmony with modern developments and payment options. It is becoming a weapon in the hands of consumers which they use against merchants.
Some consumers file a chargeback in the following wrong situations
- You use the chargeback to void restocking or processing fees.
- You have a buyer’s remorse.
- The return process is lengthy.
- You cannot wait or understand the delivery schedule.
- One of family members made a purchase but didn’t want to pay the cash.
- if you forget the transaction and cannot remember you made it.
- You want something for free.
A lot of chargeback claims are based on unauthorized payments. There were chargeback cases in which the consumers did not request cash back from merchants. The wrong chargeback case is not a good deal.
It destroys your reputation. Family fraud cost much to merchants and consumers.
Chargeback costs for merchants
There are consequences for merchants due to chargebacks.
- There is a fee for every chargeback case which is imposed on the merchant.
- The merchant loses cash and future profits.
- There is a threshold for chargeback rates. You may have t pay a fine.
- The bank may terminate merchant account if there are repeated cases of chargebacks.
- If the merchant account is closed and the business may be blacklisted.
- There may be some other consequences for merchants even if the bank does not close the account.
- The dispute is not beneficial for the merchant as well as the consumer.
Responsibilities of merchants
If you are a merchant, you need to avoid chargebacks whether they are right or wrong. If you offer prompt customer care and high-quality services, you may prevent it in a better way. You should not provide a reason to consumer t file a chargeback case. If you offer your services in a better way, friendly fraud will reduce. You may have fraud detection tools to identify the transactions that could lead to chargeback cases. If you prevent a fraudster from purchasing your products, it will avoid the risk f chargeback.
Responsibilities of credit cardholders
You need to understand credit card is a privilege that facilitates the payments. It may not be taken as a right. cardholder have responsibilities is to keep the credit card information physically and virtually safe. You should have an ethical based ad legal reason to use chargeback.