What is a chargeback?

A chargeback is a term used for when a customer disputes a transaction and the merchant may be required to refund the value of the goods or services. It is usually initiated by a cardholder calling their bank to enquire about the transaction.

What are the reasons for a chargeback?

There are several different reasons why a transaction could be charged back, with the two most common being a point of sale error or the card issuer disputing the transaction. Other reasons include:

  • Requested transaction copy or supporting documentation not received
  • Duplicate processing
  • Exceeding the card floor limit
  • Invalid account number
  • Merchandise lost or not received
  • Failure to cancel direct debit payments from a customer request

The chargeback process

Once the enquiry is received by the cardholder’s bank, they will usually request information or documentation to be provided within a certain timeframe to prevent the chargeback.  The validity of the chargeback is determined by the credit card scheme (e.g. Visa/Mastercard).

There are three usual steps the chargeback process follows:

  1. The cardholder disputes the transaction
  2. The card issuer advises the merchant bank
  3. The dispute is processed

From here there are two possible outcomes, either the merchant was successful or the merchant is unsuccessful.

How to avoid chargebacks

To avoid chargebacks, we encourage you to keep hold of the following documentation:

  1. Your merchant receipts with either the cardholder’s signature or a receipt showing the transaction to be pin authorised
  2. The direct debit authorisation form signed by card holder, especially for customers who are processing phone orders (MOTO) and online virtual transactions
  3. Tax invoice billed to your customer
  4. Any written or email communication between you and the customer regarding the payment for the good or service.

Where possible, you should contact the customer directly to resolve the dispute so the cardholder can withdraw the chargeback enquiry with their bank.

It’s also important to be aware that even if all the supporting documentation has been provided, the cardholder may still be able to successfully dispute the transaction and have a chargeback occur.  In this case, Live eftpos will raise a chargeback against the merchant’s bank account, which could incur a fee of $33.  A chargeback query can occur up to 12 months after the transaction date.

We’re here to help you minimise your chargebacks. If you have any questions, please email support@liveeftpos.com.au

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