US Bankcard Services Industry Blog

Monday, June 28, 2010

Bankcard Services: Chargeback FAQs

A chargeback occurs when funds are returned to a consumer due to disputes, errors, or fraud. When the credit card company withdraws the money from the merchant’s account and returns it to the consumer, merchants are charged a chargeback fee. Below are answers to a merchant’s questions regarding a credit card chargeback. What are the common practices that I should avoid? • Never let any customer operates your U.S. Bankcard Services, Inc. (USBSI) credit card terminal. • If you receive a “decline” card response, do not process any more sales on that particular card. • Only use an authorization code that has been provided directly from your merchant processor. • Never use the customer’s phone to call for a transaction authorization. Why did I get a chargeback when I received an approval code for the transaction? An authorization code simply verifies if the card is in good standing, has not been reported lost or stolen, and has sufficient funds available for the amount of the transaction. It does not guarantee that you will not receive a chargeback. How can I guarantee my transaction does not turn into a chargeback? Fraud is virtually unavoidable and disputes will always happen. However, minimizing risk exposure may help prevent a chargeback. Follow the transaction requirements and utilize all the available resources (AVS or Calling Code 10 Service.) Refuse to process any suspicious credit card transactions and request the customer provide a different form of payment. How critical is the “respond by date” from the chargeback or retrieval advice? VERY. Special attention must be paid to the response deadline or it will result to a non-reversible chargeback. It is highly recommended to respond to the chargeback or retrieval as quickly as possible to avoid unexpected situations. Why did the processing bank debit my account without notifying me first? In accordance to Visa and MasterCard regulations, an automatic debit occurs against the credit card processing bank and passed to the merchant each time a chargeback is initiated. If merchants respond with sufficient information within the allotted timeframe to counteract the issue, the debit may be reversed. How long does a card issuing bank have in bringing up a chargeback? The Card Issuing Bank can request a retrieval or chargeback for up to 18 months after the transaction date. It is crucial that transaction records are kept and made accessible and legible during this timeframe.