What is a chargeback and how can businesses avoid them?


One of the largest concerns for merchant entities around the world revolves around chargebacks. As per Juniper Report, in 2021, global chargeback volume would reach 615 million, with an average industry cost per chargeback of $191 by 2023. Are you wondering what do chargebacks mean and what you can do to prevent their occurrence? Let Team Beyond Bancard help you with the same!


Introduction to chargebacks


A chargeback is a refund of funds to a transaction’s payer, most commonly a credit card transaction. Most of the time, the payer is a customer. This charge gets levied when a consumer’s bank account, line of credit, or credit card is used to reverse a money transfer. The banking entity that issues the consumer’s payment card authorizes the chargeback.  

In the distribution business, chargebacks are also common. Supplier may sell a product to a distributor at a higher price than the previously agreed price with the end-user. The instance is recognized as a chargeback. The distributor then files a chargeback with the supplier to recoup the funds lost in the transaction. Learn more about what is a POS System.

Cardholders start chargebacks, which are examined by banks and paid for by merchants. If the business has proof that the chargeback is fraudulent, they can present the same to the bank to reconsider its judgment.


Chargebacks in the United States


The chargeback mechanism substantially protects consumers. Regulation Z of the Truth in Lending Act provides reversing privileges to owners of credit and debit cards registered in the United States. Debit cardholders in the United States have reversal rights under Regulation E of the Electronic Fund Transfer Act. According to the restrictions set out by the card association or bank network in issue, the same rights apply globally. According to the rules, the card association is in charge of settling complaints.

Upon reviewing the dealer’s answer to the original chargeback, the card company may initiate a second chargeback against the shop. The second chargeback occurs when the merchant responds to the initial chargeback in a second crediting of the cardholder’s account for the disputed money. After the second chargeback, the merchant’s only option is to ask the card association to settle the dispute.


Reason for Chargebacks


The issuer determines and transmits a numeric cause code for each chargeback. This information might aid the merchant and acquirer in identifying mistakes and improving customer satisfaction. Reason codes differ per bank network, but they all fall into one of four categories:

1. Technical reasons:  It might be due to outdated permission, a shortage of funds, or a banking transaction failure.

2. Clerical errors: Duplicate invoicing, erroneous invoicing amounts, and unpaid reimbursements are all examples.

3. The reason regarding the quality of the product: The customer alleges that the items offered at the point of the purchase were never delivered.

4. Theft: The customer alleges that they did not approve the transaction or were the victim of fraud.

Various scenarios qualify for a chargeback request, including: 

1. Improper payments or forgery on your account: If you don’t recognize a transaction and feel it was fraudulent, report it to the police. 

2. Undeliverable packages: You may receive notification that an item was delivered, but it wasn’t. 

3. Charges on your account are incorrect: The price of the item you bought was not the same as what you were charged. 

4. Items that are faulty or malfunctioning: Items that were damaged or faulty when they arrived, such as those that got opened or had missing pieces.


What is the procedure for requesting a chargeback?


  • If getting a refund from the retailer doesn’t work, file a chargeback with your credit card company.
  • Many credit card companies permit you to dispute purchases via the phone, by letter, or online.
  • You might be able to file a dispute using your card issuer’s mobile app as well.
  • Supporting papers, such as copies of a receipt, invoice, contract, and any correspondence you had with the merchant, may be required when filing a chargeback.
  • The specific procedure varies based on your card issuer, network, and scenario after you make a chargeback request, but it usually involves some back-and-forth between multiple parties.



Chargeback losses and how to prevent them for businesses?  

Businesses face the following costs during and after a consumer chargeback:


  • Processing fees have got lost.
  • The expense of a chargeback inquiry
  • Expenses for redistributing merchandise
  • Labor expenses for management
  • Fees for chargebacks.
  • Sales and clients might get lost.


 While it’s hard to totally eliminate chargebacks, lowering them saves money and safeguards your company’s image. To avoid credit card disputes, use the strategies listed below.


  • Keep your returning and dispute procedures as simple as possible.
  • Make use of multiple-layer payment systems and make the delivery and invoicing processes as transparent as possible.
  • Staff should get educated on optimal practices.

  • Examine your chargeback information.
  • Consumer expectations must get managed.
  • Opting best POS system, which is crucial and works in tandem with your payment options. It helps in data collection, analysis, and action that is critical in all aspects of business, including chargeback prevention.


How can Beyond Bancard help with merchant services and lowering your chargebacks?


Beyond Bancard offers Chargeback Management and assign an account manager to your account. Our goal is to assist in the case of any chargeback. All of our merchants can expect the most incredible POS Systems from Beyond Bancard. We offer merchants innovative, flexible payment processing options and a complete bundle of merchant services. Your needs get addressed with honesty, efficiency, and accuracy. Our team seeks to help each sector and customize its needs, from major brands to small businesses. Merchants can cater to credit card processing needs astutely!

Beyond Bancard chooses to buck the trend of low-quality services by offering transparent processing solutions and the best POS systems. We enable you to concentrate on developing your business. Contact us to know more about our offerings!


Need Chargeback Management?

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