{"id":5774,"date":"2017-04-05T09:38:57","date_gmt":"2017-04-05T09:38:57","guid":{"rendered":"https:\/\/www.instamojo.com\/blog\/?p=5774"},"modified":"2022-11-06T21:19:08","modified_gmt":"2022-11-06T15:49:08","slug":"chargeback-meaning-merchants-bank-instamojo","status":"publish","type":"post","link":"https:\/\/www.instamojo.com\/blog\/chargeback-meaning-merchants-bank-instamojo\/","title":{"rendered":"What are chargebacks? Everything merchants need to know"},"content":{"rendered":"

If you are a merchant that accepts credit and debit cards for your online business, you may have come across the term <\/span>chargebacks<\/b>. What does it mean? Let us tell you what it is and how you can prevent chargebacks.\u00a0<\/span><\/p>\n

What are chargebacks?<\/b><\/h2>\n

When your customer disputes a transaction, the customer\u2019s bank (issuing bank) allows them to file a complaint and demand a refund from you – the merchant. <\/span><\/p>\n

Your bank will debit the disputed funds from your account and place these funds on hold, pending the outcome of the case.<\/span><\/p>\n

Your customer\u2019s bank will then initiate an investigation into the transaction. If the dispute is found to be legitimate, the held funds will be credited to your customer\u2019s account.<\/span><\/p>\n

If the customer\u2019s claims are discovered to be without merit, the held funds will be reversed to the merchant\u2019s account. The process of filing a dispute is called a<\/strong>\u00a0c<\/strong><\/span>hargeback<\/b>.<\/span><\/p>\n

Why Should Merchants Worry About Chargebacks<\/b><\/h2>\n

Chargebacks can be damaging to a merchant account. You don\u2019t just stand the risk of losing your money and products but also your reputation.<\/span><\/p>\n

Think of it as damaging your credit score. If your business account gets too many chargebacks, Credit Card companies may think you are a fraudulent company. You may also lose the ability to accept payments via cards.<\/span><\/p>\n

Kinds of Chargebacks<\/b><\/h2>\n

When can a customer initiate a chargeback? The customer can raise a dispute against any transaction. With each chargeback, the customer\u2019s bank specifies <\/span>a reason code<\/b>. <\/span><\/p>\n

Reason codes vary by bank networks (card association), but fall into four general categories:<\/span><\/p>\n

1. Billing issues:<\/b> Duplicate billing, incorrect amount billed, or promised refund never issued.<\/span><\/p>\n

2. Quality:<\/b> Delivered\/ received goods or services that were not as promised at the time of purchase.<\/span><\/p>\n

3. Fraud:<\/b> Consumer claims they did not authorize the purchase or identity theft.<\/span><\/p>\n

4. Fulfillment:<\/b> The purchased services were not rendered or goods were not delivered to the customer.<\/span><\/p>\n

What Happens Next?<\/b><\/h2>\n

A customer can raise a chargeback within 180 days from the date of the transaction. Once raised, the merchant needs to present documents to support their case within 2 to 8 days of the dispute being raised. Banks close a chargeback case in 180 days.<\/span><\/p>\n

Note<\/b>: The customer may present a counterclaim to a merchant\u2019s representation. If the banks are unable to come to a consensus, then the case is escalated to the Card Associations for Arbitration. <\/span><\/p>\n

How do I prevent chargebacks?<\/b><\/h2>\n

It\u2019s important to prevent chargebacks as a merchant. Here is what you can do to avoid chargebacks:<\/span><\/p>\n