What are chargebacks and what is the process
Chargebacks are an inevitable part of doing business when you accept payments by card. There are different types – legitimate chargebacks and illegal ones resulting from fraudulent activity.
By understanding the rights, responsibilities and remedies associated with chargebacks, you’ll be able to minimise your risks and help avoid unwinnable, or costly, disputes.
What is a chargeback?
A chargeback is a transaction reversal initiated by a cardholder's bank or payment card provider, often in response to a dispute or a problem with a purchase. When a chargeback occurs, the funds for a particular transaction are taken from the merchant's account and returned to the cardholder.
Most common Dispute types
- Duplicate Charge
- Paid By Other Means
- Goods or Services Not Received
- Cancelled Purchase
- Goods or Services Not as Described or Defective
- Incorrect Amount
What are the stages of a chargeback?
Stage 1: Cardholder disputes a card transaction with their Issuing Bank.
Stage 2: The Issuing Bank lodges the Chargeback with the Card Scheme if valid.
Stage 3: The Card Scheme debits the Acquirer while the dispute is investigated.
Stage 4: Merchant is notified immediately and debits your account on that day.
Stage 5: You can either accept the Chargeback or defend it with precise, documented evidence
Stage 6: If the evidence is insufficient or insufficiently strong or the cardholder is not to blame, the debit will remain. If your evidence is accepted, the debit will be reversed and you will not be out of pocket
What are the timeframes?
Chargebacks can cost you time as well as money, so it is in your interest to act swiftly when one occurs. In most cases, a cardholder can contact their bank and request their money back within 90 to 120 days from the date of the disputed transaction, depending on the reason code. If you dispute a chargeback, you’ll need to provide detailed documentation – and then the cardholder’s Bank has 30 to 45 days to either accept your evidence or continue the dispute.
What is the cost of a chargeback?
All the rules, regulations and timeframes are determined by the card schemes, typically Visa, Mastercard, UnionPay and the EFTPOS providers, including but not limited to credit card, debit card and prepaid card.When a chargeback occurs, you will be notified, and the chargeback will be debited from your merchant account on that day. A AUD$30 admin fee per chargeback will appear on your monthly invoice.
If you require more information about chargeback, please contact our chargeback team at support@flippay.com.au.