What is a Chargeback?

When you start credit card processing in Pensacola, FL, you'll undoubtedly have to worry about credit card fraud and chargebacks. Chargebacks can be costly and damaging to your bottom line if you're not cautious. Gulf Coast Merchant Services is here to help you understand what chargebacks are, how they work, and why you should avoid them. 

A chargeback happens when a cardholder decides to dispute a transaction with their credit card company. The credit card company will then contact the merchant and request a refund for the transaction amount. If not provided, the credit card company will reverse the transaction, taking the funds from the merchant's account and returning them to the cardholder. 

Chargebacks are not only time-consuming, but they also cost money both to the card issuer and the acquirer (the bank that processes credit card transactions for the merchant). Furthermore, if a business has a high chargeback rate, it may be blacklisted by the card company, resulting in its account being suspended or shut down. 

A chargeback is issued because of one of three types of credit card fraud. The types of fraud are true fraud, friendly fraud, and chargeback fraud.   

True fraud is when a person’s credit card information has been stolen and used without authorization to purchase from your store. When the fraudulent activity is detected, a chargeback is issued, the cardholder is refunded, and a replacement card is sent. Although it's unfortunate, true fraud does happen from time to time. If you sell products or services online, you're likely to experience some chargebacks because of this type of fraud. 

The term “Friendly fraud” is used in cases where a cardholder disputes a charge and requests a refund even though it wasn't true fraud. In this case, the cardholder did in fact make the purchase, but they may have forgotten they did so or maybe a family member used the card to make the purchase. Or maybe they didn't recognize the store name on their credit card statement. There are many reasons why friendly fraud might occur, but none are truly malicious.  

Chargeback fraud occurs when a cardholder asks for a refund, claiming they didn't make a purchase. They ask for the refund simply to get their money back, but they keep the product.  

Before you get your first chargeback, it's beneficial to understand the three primary types of fraud that result in these requests for refunds from credit card providers. If you are looking for a new or improved point of sale system for your business, contact Gulf Coast Merchant Services today.  

 

Gulf Coast Merchant Services has been a leading provider of Point of Sale & Merchant Services in Pensacola Florida and across the U.S. since 2001. The team at Gulf Coast Merchant Services is dedicated to bringing you superior service and the best-in-class POS Solutions & Payment Processing. 

Gulf Coast Merchant Services LLC 
180 E. Burgess Rd. Suite D 
Pensacola, FL 32503 
(850) 995-4414 
https://gulfcoastmerchantservices.com/