A Chargeback occurs when a customer formally disputes a charge by contacting the issuer of the credit card. Customers usually dispute charges if they do not recognize the amount or business making the charge, or if they disagree with the transaction. Merchants can take steps to avoid Chargebacks by ensuring that the proper business name appears on the customers’ statements, providing itemized receipts, implementing fair return policies, and working cordially to resolve disputes before they become Chargebacks. If merchants feel that a Chargeback was unfairly issued, they can fight it by submitting proof that the customer approved the transaction. This can be done with signed receipts, invoices, or other tangible proof of authorization.
Merchants should work to avoid Chargebacks because too many can result in actions by merchant account provider such as placing holds on funds and terminating the account. Providers may also raise the transaction fees, or even place a merchant on the Terminated Merchant File if the Chargebacks are suspected to be caused by fraud. The typical fee for a chargeback is $25-$35 per incident.