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Merchant Account Chargebacks: How They Affect Your Business

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All mentions of rate and fee costs are estimations based on publicly available information and client feedback. Actual costs may vary based on a variety of factors unique to your business.

A depiction of Merchant Account Chargeback fees

What is a Merchant Account Chargeback?

A chargeback is essentially a transaction reversal that’s initiated by a credit card holder through their bank. This happens when the cardholder disputes a charge on their account, claiming something went wrong with the transaction.

Common Causes of Chargebacks

Chargebacks are triggered by a variety of issues, ranging from fraudulent transactions, where stolen card information is used, to customer dissatisfaction, such as receiving a damaged product or one that doesn’t meet the advertised standards. Other common reasons include clerical errors like accidental double billing or incorrect transaction amounts, and procedural mistakes such as failing to issue a refund when promised.

Financial Impacts of Chargebacks

The financial repercussions of chargebacks for businesses extend beyond the immediate loss of sale revenue. Each chargeback incurs an administrative fee, and frequent chargebacks may lead to higher transaction fees or additional penalties from payment processors. Excessive chargeback rates can strain business relationships with financial institutions, potentially resulting in the termination of processing agreements.