Chargebacks are Insurance (But Don’t Abuse It)

Alex ForbessChargeback BasicsLeave a Comment

chargeback are insurance (but don't abuse it)

The chargeback process is key part of what makes payments works, but customers should use appropriately. Disputing a charge in a situation of fraudulent charges or a completely unresponsive merchant is why this process is in place. It becomes a problem when customers start abusing this process.

Key Part of Payments

We live in the age of ecommerce. Now customers order products from all over the world in the comfort of their home and the product gets delivered to their doorstep. Most people don’t even think twice before ordering anything online. This is possible because of the chargeback process.

The chargeback process is in place as insurance, as reassurance, as peace of mind for anyone that is using a credit card. It is the idea that no matter where the card is used, if the merchant does not uphold their end of the deal, then the cardholder does not lose their money. Without this process in place would any customer be willing to give their card number to any ecommerce merchant?

Abusing The Process Has Repercussions

Now that we have established how important the chargeback process is, we need to talk about what happens when this process is abused. Here are four of the repercussions of chargeback abuse or fraud:

1. Getting a New Credit Card

This may not sound like that big of a deal, but it definitely can be. When a cardholder reports fraud on their card the account gets shut down immediately and the card number is blacklisted. A new card is sent to the cardholder. This is a consequence of inconveniences. Now that the old card it blacklisted every automatic payment, saved card number on frequented websites, and bill payments that are connected to that card will now have to be updated. This means everything from Netflix to gas bills. If something big falls through the cracks and doesn’t get updated it can lead to late fees, accounts being shut down, or worse.

2. Losing a Chargeback

If a purchase is made with the intention to commit chargeback fraud the customer is trying to get the product for free. This is where the Chargeback App can help merchants. The chargeback process is a check and balance between merchants and customers. Merchants can present specific evidence to show how the chargeback is invalid. When the merchant wins the case the customer will be charged for the original amount.

3. Blacklisted

Merchants do not have to take abuse. They have the right to turn away customer just like the classic “no shirt, no shoes, no service.” If a customer issues a chargeback the merchant can ban that credit card number, account, address, or anything else connected with the customer to stop them from purchasing again.

4. Legal Action

If the merchant feels like the chargeback fraud requires further action they are able to bring legal action against the fraudster. In the end these chargeback fraudsters are abusing the process to steal goods from the merchant. Shoplifters can be prosecuted for stealing and so can chargeback fraudsters.

How to Resolve Without Chargebacks

A charge should be disputed only as a last resort. First customers should try to contact the merchant to resolve the issue. The vast majority of merchant will be happy to resolve the issue with their customer. Customers just need to know that contacting the merchant is where they should start.

Merchants can make this clear to customers by making it crucial that you explain how your customer service can resolve any dissatisfaction. This means putting your contact information easy to find on your website, emails, or invoices. Also having policies put in place for your customer service when situation like the wrong size or damaged merchandise complaints come in that make it as easy as possible for the customer. These small things can help prevent customers from going right to the chargeback process.

 

Customer Service Policy