Chargebacks: More Than Just a Refund

Chargebacks: More Than Just a Refund

The success of any e-commerce business relies on customer satisfaction. When a customer purchases goods from your website, and they aren’t happy with the product, they will most likely try to get their money back. In the payments industry, we call this a chargeback.

When a customer requests a chargeback on a completed transaction, the credit card issuing bank returns the funds and reverses the transaction. Once this happens, the issuing bank notifies the acquiring bank and debits the funds. Next, the acquiring bank notifies Instabill—the payment processor–of the chargeback.

The way Instabill handles chargebacks is simple. You’ll receive an email notification from us regarding the chargeback. We will tell you the customer’s reason for the chargeback, and request that you provide documentation to reverse the chargeback.

Top Three Reasons Why Customers Request Chargebacks

There are numerous reasons why a customer may demand a refund after purchasing goods or services. The most common reasons why customers request chargebacks are:

  1. They never received their merchandise
  2. The item was not as described, or it was defective
  3. The cardholder did not authorize the transaction, making it a fraudulent transaction

Chargeback Reversals

After Instabill notifies you of the chargeback, you have three days to provide us with documents to reverse it. When we receive the documents, we’ll submit them to your acquiring bank, who will then submit them to the cardholder’s issuing bank. The issuing bank will determine if the documents you provided are sufficient to reverse the chargeback.

One of two things will happen next:

  1. If the issuing bank in favor of the merchant, they will charge the consumer for the transaction and put the approved funds back into your merchant account.
  2. If the issuing bank decides in favor of the consumer, they will cancel the transaction and provide the consumer with a full refund.

The cardholder should always contact the merchant first to resolve any billing discrepancies. If the merchant does not resolve the dispute, the cardholder should contact Instabill. Instabill will resolve the dispute to the cardholder’s satisfaction. If you receive a chargeback notification from Instabill, DO NOT refund the cardholder–they’ve already received a credit from their issuing bank upon processing of the chargeback.

MasterCard Chargeback Rules

MasterCard labels a merchant as an Excessive Chargeback Merchant (ECM) if they have a chargeback-to-transaction ratio (CTR) of more than 1% for at least two consecutive months. They must also process at least 50 chargebacks per month. Once they reduce their chargeback ratio to less than 1% for two consecutive months, MasterCard no longer considers them an EMC. Read more about MasterCard’s Excessive Chargeback Program.

Visa Chargeback Rules

Merchants processing Visa credit cards must keep their chargeback ratio below 2% with no more than 100 chargeback transactions per month. Visa provides three different chargeback monitoring programs to help merchants maintain the lowest possible chargeback ratio, which includes:

  • Merchant Chargeback Monitoring Program (MCMP)
  • High-Risk Chargeback Monitoring Program (HRCMP)
  • Global Merchant Chargeback Monitoring Program (GMCMP)

For more information on chargebacks, chargeback prevention, or chargeback reversals, call us toll-free at 1-800-318-2713 or contact us online today.

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