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Chargeback troubles? Fight back with these key steps
By Brian O'Connell
Retail business owners don't like operating in reverse, but that's exactly what happens, at least from a financial point of view, when chargebacks haunt their bank accounts.
What are chargebacks? In a word, they're basically credit card transactions that are reversed when a customer's card is stolen or lost, the transaction or charge is disputed or there is some kind of credit card processing mix-up regarding the actual transaction.
Merchants view chargebacks with complete frustration, if not outright fear. In the financial balancing act that defines chargebacks, it's the business owner who is responsible for the money "charged back" to his or her company. To get the money popped back into their checking accounts, merchants have to prove the credit card transaction was legitimate -- which is not an easy task, especially if the customer doesn't want the purchase anymore.
For perspective, put the problem in everyday terms. Imagine having $2,500 pulled from your bank account after you already used the cash to pay bills -- all because a customer disputed the transaction. In most cases, it may take a day or more to prove the charge was legitimate; but in the course of that time, your checks go bouncing and the bank fees and penalties start piling up. To add further fuel to the fire, the credit card company may charge you a "handling fee" for dealing with the chargeback on their end, usually up to $15-$25 per chargeback.
Now, let's double the fun and imagine multiple chargebacks happening in the same 24-48 hour period and having even more cash pulled from your bank account. No doubt, many merchants might prefer a root canal.
So how do you solve a thorny problem like a chargeback? The answer is simple, but highly effective: Just get in front of the problem. Here's how to prevent some of the most common causes of credit card chargebacks:
1. Act fast after a
2. Speed up your
3. Pay heed to "declined"
4. Keep a manual card
imprint machine handy.
5.Strive for legibility.
The good news is that chargebacks are rare, especially those involving customer disputes. According to Heartland Payment Systems, a merchant-services provider, only .01% of all credit card charges are disputed. But chargebacks do happen, and they can happen to you. Take the steps listed above as an insurance policy against a chargeback happening to you, and keep your bank account intact, solvent and chargeback-free.
Published: June 1, 2011