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Illegitimate chargebacks (also called “friendly fraud”) are a growing problem for merchants. Companies with high chargeback rates are looked at as “unsafe”-a label no business wants to have. When a card issuer mandates a chargeback, merchants also have additional problems with revenue management by adding more complexity to the finances of a businessĬhargebacks are also a big concern for payment processors, as they can hurt their “chargeback ratio”-a key metric used by credit card networks in determining the fees that merchants pay. In their worst cases, they can be expensive and damaging to a business’s reputation.

Reversed Credit Card Charges: When a customer’s card issuer requests or forces the reversal of a previously authorized charge.Īcross all industries, chargebacks impact about 6 out of every 1,000 transactions.Īt their best, chargebacks inconvenience businesses, requiring manual effort and wasting valuable time.

Reversal Requests: A request from the processor for reimbursement of funds already sent to the merchant due to an incorrect authorization decision, fraud, or technical issue.

Retrieval Requests: A request by card issuers to provide additional information about a transaction prior to processing the payment.

Payment Disputes: Chargeback requests initiated by customers as a result of a perceived problem with the product or service they purchased.

The merchant loses the money and must then take steps to dispute the chargeback and recover their funds if they feel it is an incorrect or fraudulent claim.

Unauthorized charges from young children or family membersįrom the business side, chargeback management can be strenuous.

Customer dissatisfaction with a purchase.Fraudulent card-not-present (CNP) transactions.

This can happen for various reasons, including refund requests, billing process errors, and unauthorized purchases.Ĭhargebacks occur in a variety of forms, including: The chargeback process usually begins when the customer contacts their issuing bank directly to dispute the validity of a transaction or to report fraudulent activity. A chargeback (also called a reversal) happens when a customer disputes a transaction and their card-issuing bank reverses it.