The Complete Guide To Chargeback Protections & Management For Merchants - Kount

Giving your customers the option to pay with credit cards will help sales if you’re doing business face-to-face and they are all but necessary to engage in eCommerce. This convenience comes at a price, however, as disputed charges can quickly add snowballing costs to your business.

There are, however, ways to limit your exposure to fraudulent charges and sometimes even avoid the fines that come with a credit card transaction reversal. Need chargeback protection for merchants? Read on for a breakdown of what chargeback protection is and where you can get it.

Why Chargebacks Are A Big Problem For Merchants

Chargebacks add unwanted expenses and complications to a merchant’s retail operations. A chargeback is defined as a transaction wherein the customer’s bank forcefully reverses the charges of a credit card payment that is considered fraudulent in some way.

Merchants generally end up absorbing much of the cost related to chargebacks, with each instance costing somewhere between $15 and $100 depending on the payment processor. Worse yet, if your business starts to accrue a large number of chargebacks, it can face additional penalties and fines. You may even lose your merchant account, and losing your account results in your business being placed on the dreaded MATCH list — essentially a blacklist banks use to avoid problematic merchants.

Visa and Mastercard both have systems in place that classify merchants according to the number of disputes and chargebacks they incur. You do not want to end up classified as a high risk.

Chargebacks are broken down into three causal categories.

True Fraud Chargebacks

As the name implies, this is the most obviously fraudulent type of charge, usually resulting from someone making an unauthorized purchase with a credit card. In most cases, this will be because the credit card in question was stolen. When the real cardholder becomes aware of the charges, they’ll probably call their bank and dispute the charges. This kind of fraud is best fought with prevention and, indeed, most chargeback protection services are heavily focused on identifying patterns of criminal fraud.

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