Any time a customer calls up his credit card company and complains about a charge, retailers, their credit card processors, and their sponsors will pay. Chargebacks begin when a customer files a dispute with their bank regarding a credit or debit card transaction. Merchants are often left out of the dispute process. Customers aren’t informing the merchant of disputes at an increasing rate. And in 58% of instances, the merchant is never notified, making them defenseless against the chargeback.
U.S. merchants that accept credit and debit card payments via in-store, e-commerce, mail order, or telephone phone purchases lost 1.32% of revenue to fraud, according to the Lexis Nexis Risk Solutions True Cost of Fraud Study released in 2015. Not only was this the first year that merchants that did not handle any face-to-face transactions saw losses of more than 1%, but this was a 94% increase from the previous 12 months.
When merchants rack up excessive chargebacks, it not only cuts into their bottom lines, it puts their merchant accounts in jeopardy. High-risk merchants especially must be mindful of chargebacks. Businesses that can’t keep chargeback ratios below 2% can have their accounts terminated by processors.
he following businesses that sell these products or services face more chargebacks:
- Adult entertainment and novelties
- Auto accessories and parts
- Cigarettes, cigars, pipes, and smoking accessories
- Collectibles and antiques
- Credit repair
- Debt consolidation
- Designer fashions
- Downloadable and mobile app software
- Educational seminars
- Luxury goods and services, such as private planes and travel
- Magazine subscriptions
- MLM and direct sales
- Moving companies
- Penny auctions
- Precious metals and coins
- Sports betting
- Tech support
- Tickets for flights, concerts, excursions
- Water purifiers
Chargebacks can only be processes when they are given one of four reason codes.
The codes are:
Expired card authorizations, insufficient funds, or bank processing errors fall under the technical code. Duplicate billing, inaccurate charges, or a failure to issue a promised refund are considered clerical chargebacks.
Some chargebacks are initiated because customers fail to remember or recognize transactions when they review their credit card statements. Sending an electronic receipt with the merchant’s contact information, such as an email and billing support phone number, also helps customers remember.
Our chargebacks prevention partners and processors will help you mange the account and fight or refund customers to keep your account LIVE and win chargebacks and disputes.