What Is a Chargeback Fee?

It can be an insult added to injury: merchants who experience a chargeback are assessed an additional, nonrefundable fee on top of their lost revenue.

When a cardholder disputes a transaction, the bank performs a chargeback.  This process forcibly removes the sale revenue from the merchant’s bank and returns it to the cardholder, often without notifying the merchant. In addition, the merchant is charged a processing fee for the transaction reversal. Known as a chargeback fee, the merchant is required to pay this fee – even if they ultimately win a chargeback dispute.

How are chargeback fees determined?

Chargeback fees are based on several factors. The fee schedule is established by the acquiring bank and is part of the processing agreement. However, fees can often change with little to no warning.

Fees can vary from €20 to €50 per chargeback, and can quickly add up to a significant loss for the merchant. Merchants who experience high numbers of chargebacks can be considered ‘high risk’ and are assessed greater fees.

For some merchants, chargebacks can overwhelm their account and force them to go out of business.

How can you prevent chargebacks?

The most effective means of avoiding chargebacks is to prevent them from occurring. While it is impossible to foresee every potential scenario, merchants can establish guidelines that will prevent a majority of chargebacks from occurring.

These measures may include posting a clear return policy, maintaining excellent customer service and communication avenues, and utilising credit card security systems. Using AVS, CVV and 3D Secure systems in conjunction with other methods can eliminate potential chargebacks, saving the merchant both time and money.

How can you avoid chargeback fees?

Outside of bitcoin transactions, there is no way to prevent every potential chargeback. Merchants who want to avoid being levied additional chargeback fees must avoid chargebacks. Avoiding chargebacks involves adhering to best business practices, following recommended guidelines for credit card screening procedures and using the chargeback dispute process to fight any unwarranted chargebacks.

By combining prevention and protection efforts, merchants can retain their revenue while offering their customers a secure, hassle-free transaction.

The chargeback fee is more than just another business expense. It is an unnecessary loss that steals revenue and hurts merchants. Instead of accepting the loss, fight back with proven chargeback prevention strategies.