What Are ChargeBacks?

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Hi there!

How are you doing today?

Today I'll be talking about Chargebacks. 

First, let's start with the foundation. What are Chargebacks?

A Chargeback is understood to be a reversal of a credit/debit card charge or a dispute. That is, when you use your card online and the transaction isn't successful, there is a reversal. That reversal is called a chargeback. 

The chargeback reversal comes directly from a cardholder's bank but it's different from a return of a sale between a consumer and a business. Chargebacks exist to give buyers protection from businesses who might otherwise be selling subpar products and/or services or doing things that fall a little bit out of ethical boundaries. 

The Chargeback process favours the consumer as a result, and often times businesses don't even know that a Chargeback dispute has occurred until after the complaint and dispute bas been filed already. However, there are chargeback services that can catch chargebacks before they get reported to the merchant account provider. 

The 4 major card brands that are used for transactions are; Mastercard, Visa, American Express and Discover Network.

There are three (3) types of Chargebacks;

  1.  True Fraud: This is the unauthorized use of a credit card without the cardholder's knowledge, and in this case, it is clearly theft. A true fraud chargeback often results in the cardholder's card number being shut down and a new card number is issued due to the fact that the credit card number itself has been compromised and there is an increased likelihood of a repeat fraudulent transaction. 
  2. Chargeback Fraud: This is where the cardholder has ill intent and is likely trying to get away with not paying for a product or a service that they have rightfully ordered or purchased. So the cardholder's intent is the critical element here for chargeback fraud. The business may have delivered the product/service exactly as described or placed by the cardholder but the cardholder files a chargeback dispute so that they don't have to pay for the item or service.  Please don't do this. If not, jail! 
  3. Friendly Fraud: This occurs when cardholders issue a chargeback with no malicious intent. It could be due to a common honest misunderstanding or forgetfulness. 

Some of the reasons why Friendly Fraud chargebacks could occur;

  • Consumer didn't receive the product they ordered
  • Consumer didn't receive all their order, just some parts
  • Consumer feels the product/service was not what was represented (more a case of "what I ordered versus what I got")
  • The consumer's package arrived damaged or destroyed 
  • Consumer didn't recognize the charge on their cards
  • Children who made purchases on an Adult's card without their consent
  • Consumer forgot they ordered the product/service and other similar scenarios.

There are varying statistics that show that the two categories of friendly fraud and chargeback fraud account for well over half of the chargeback cases that are reported with Visa, Mastercard and all other major card brands. 

In conclusion, there are processes for chargeback resolution and they might take about 10-15 business days to resolve or in some cases less or more than that. 

What are your thoughts on this?

I hope this was helpful.

Till next time. Remain awesome.

Franny. 



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