A Chargeback happens when a customer disputes a charge on his credit card through the credit card provider. Customers usually dispute charges if they do not recognize the amount or business making the charge, or if they disagree with the transaction for some reason. Merchants can take steps to avoid chargebacks, such as: ensuring that the proper business name appears on the customers’ statements, providing itemized receipts, having fair return policies and working cordially to resolve disputes before they become chargebacks. If merchants feel that a chargeback was unfairly issued, they can fight it by submitting proof that the customer approved the transaction. This can be done with signed receipts, invoices or other tangible proof of authorization.
Merchants should work to avoid chargebacks as best they can because too many will result in actions by merchant account provider to avoid losses on their part. These actions may include forcing the merchant to establish a “cash reserve” with the provider to pay for any losses caused by the merchant. They may also raise the transaction fees, or even close the account if a merchant has too many chargebacks. The typical fee for a chargeback is $25-$35 per incident.
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