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How to protect yourself from a chargeback as a merchant: Learn your merchant rights


One of the worst nightmares of the present financial system for online merchants is a chargeback, especially if you rely on credit card payments as your main source of online funds transaction. If you are planning to start an online business and want to process customer credit cards for transactions, learning about how chargeback’s work and how to handle them is a must.

What is Chargeback?

Credit card issuing institutions develop the chargeback system to protect the rights and finances of their customers but the ease of using this option to get your money back makes it a grave threat to the survival of online businesses. Chargeback is also known as reversal, an option for customers to get their money back against any fraudulent transactions on their credit cards.

The special interest of banks (for their own commission) in pursuing chargeback claims allows many dishonest customers to misuse the process who simply claim for chargeback even if they don’t like the delivered products or services. With more merchant chargeback claims issued against you, you may find many credit card issuing companies turning hostile against your business.

Chargeback Protection Options

It is becoming more and more vital for online merchants to take protective measures against chargeback. As the threat of chargeback is growing for online businesses, merchants need to learn about handling chargeback claims and how to protect their businesses from chargeback and after effects.

Setting up Chargeback Protection.

This may be a costly solution but it helps online merchants to prevent chargebacks from occurring, instead of dealing with the after effects of the chargeback. There are companies with substantial chargeback protections experience that can protect your business from a merchant chargeback.  A simple chargeback protection tip is to increase the response to retrieval requests. One of the major reasons for chargeback is lack of response from companies.

Use of Software.

Many merchants waste time in reviewing credit cards that are questionable. Instead, invest in latest software with an ability to screen credit cards for chargeback or fraudulent history. One good option is signing up with “Chargeback Shield’ service that alerts you in case of past suspicious activity of card holder or if there is a discrepancy in address verification.

In Time Retrieval Response.

Whenever a chargeback is claimed by a customer, the credit card issuer asks the online merchant to provide the sales draft of the transaction. If you fail to do so in time, that is normally ten days, the customer will be granted chargeback and fees will be imposed on the merchant. It is necessary to keep record of all financial transactions at least for 180 days for Master card transactions and 3 years for Visa.

Chargeback Policy.

Make sure to develop a custom chargeback policy for your business and make it evident on your webpage. The policy may include if you accept chargeback claims, cost or fees for researching the claim, fees if the customer loses his chargeback claim, etc. Make sure your refund and return policy is also clear and visible on your website.

Effective Customer Service and Complaint Handling.

If you can deal with the customers claim in a professional and friendly manner, you may reduce the chargeback claims radically. Most customers go to credit card issuers for a chargeback once they become annoyed with the customer support and complaint handling of the company. Make sure to resolve the issue raised by the customer on your own instead of bringing the bank in between. A good customer service practice is to send confirmation emails to customers, which can reduce the fraudulent use of credit cards on your website.

If you are an online business dealing with credit card transactions, complete protection against chargeback may not be possible, but if you have enough knowledge about the system, you can certainly reduce the number of chargeback claims to lowest possible figure.


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