How to Dispute a Chargeback and Win!
It seems simple enough. Your customer makes a purchase with their credit card; the money shows up in the bank. Things are going well, until you start noticing chargebacks on your bank statement. What exactly are chargebacks, and how can you fight back against friendly fraud?
Chargebacks can originate from either the bank or the customer. Bank initiated chargebacks (started by the bank that issued the credit card) are typically handled by the acquirer, without any involvement by the merchant. These types of chargebacks are generally due to some type of processing error.
Customer initiated chargebacks are passed on to the merchant to either accept or dispute. Any chargeback that is a result of friendly fraud should be quickly dealt with through representment.
The Effect of Chargebacks
Many merchants mistakenly assume that chargebacks are just part of the cost of doing business. Without a clear understanding of the long term effects of friendly fraud, these merchants can be hindering their own future growth and profit margins.
Chargebacks are more than the loss of a sale. They come with a hefty fee (often as much as 3 times the original sale), and are passed on to the merchant without warning. Not only is the business losing the revenue from the sale, they are losing additional funds that can quickly add up.
In addition to the lost revenue, a pattern of chargebacks can have a detrimental effect on the business’ banking and merchant services reputation. When a bank handles a chargeback, it assumes the merchant is guilty. Accepting the chargeback without question solidifies that guilt, and numerous chargebacks can cause the bank to withdraw the ability of the business to accept credit cards.
When a customer completes a credit card transaction, the merchant ‘presents’ the sale to the bank for payment. If the transaction is disputed for some reason, the sale is considered a ‘chargeback’. Anytime a merchant files a chargeback dispute, that sale is presented to the bank for a second time – a process known as ‘representment’.
Representment has a limited response time, often only 7 days are allotted to file a rebuttal. Merchants must respond quickly and decisively to successfully dispute chargebacks.
Preparing Chargeback Representment
There are various strategies that can make representment attempts more successful.
Learn the System
To successfully dispute chargebacks, merchants need to be educated about the process. MasterCard and Visa have specific regulations that are unique to their network and have different steps involved in the chargeback dispute. Finding out the particular steps each network requires is vital.
The best defense to chargebacks is to be prepared. Establishing systems that provide excellent customer service, while collecting documentation on each transaction, is the most effective way to successfully handle representment.
Training staff to properly handle each customer interaction can help prevent chargebacks. Everything from the initial inquiry, explaining the shipping process or discussing the return policy can all help in keeping the lines of communication open with a customer and can eliminate confusion or misunderstanding about the purchase.
Data is an important part of chargeback defense. Developing a plan for collecting and storing sales data will become a key component in chargeback disputes. Trying to locate delivery paperwork in a catch-all drawer is futile when there is a limited time to respond. Establish a filing system and train employees on how to properly handle important documents.
While your initial reaction may be to vent your frustration on the bank’s representative that answers your frantic call, that is not the best means of dealing with a chargeback. All chargeback disputes need to be handled in writing and in a professional manner. A chargeback rebuttal letter requires detailed information presented in a clear manner. Provide the necessary documentation, present your case, but leave the emotional pleas out.
Another key to winning representment is to know how to respond. Investigate the network’s chargeback reason codes, so that you understand why the chargeback was filed. Tailor your rebuttal to the reason given.
Also, find out what each issuing bank looks for in a successful chargeback dispute, so that you can provide them with the documentation they want.
In addition to a professionally written rebuttal letter, all chargeback representment claims must include sufficient evidence to support the charge. While individual networks have differing standards of proof, there are basic elements that would substantiate a merchant’s case.
Running a business doesn’t have to be a headache. You handle your customers; let us handle the disputes.
Want more information on how to successfully dispute a chargeback? Need more resources to learn about the representment process? Contact us to find out how we can help you navigate chargebacks successfully.