6 Reasons for Merchant Chargebacks

In a credit card transaction, both the cardholder and the credit card issuer have the right to question or dispute a transaction. When such disputes go unresolved, merchant account holders may be subject to a Chargeback, which can hurt your bottom line as a business.

When your business submits an application for a merchant account, your chargeback risk is typically one of the largest factors during your application review and underwriting. If you’ve been declined for a merchant account, it’s possible your chargeback risk was part of the reason.

Why Do Merchant Chargebacks Occur?

There are many reasons why a chargeback may occur. When they occur, your settlement funds or merchant account may debited. Avoiding these pesky chargebacks begins with due diligence at the point of sale.

The following are some of the most common types of Chargebacks. This list is not exhaustive, though it does cover many of the reasons for chargebacks:

  • Authorization Issues: Proper authorization procedures were not followed and valid authorization was not obtained;
  • Cancellations and Returns: Credit was not processed properly or the cardholder has cancelled and/or returned items;
  • Fraud: Transactions that the cardholder claims are unauthorized; the account number is no longer in use or is fictitious, or the merchant was identified as “high risk;”
  • Cardholder Disputes: Merchandise or services not received by the cardholder; merchandise defective or not as described;
  • Processing Errors: Error was made when transaction was processed or it was billed incorrectly;
  • Non-Receipt of Information: Failure to respond to a retrieval request or cardholder does not recognize the transaction.

Whenever possible, it is recommended that you contact the cardholder directly to resolve a disputed transaction (unless the dispute involves a Discover network cardholder; Discover rules prohibit you from contacting the cardholder).

Stay tuned to the BluePay blog in the days ahead for a series of posts about how to avoid credit card chargebacks.

BluePay Processing, LLC is a registered ISO of Wells Fargo Bank, N.A., Walnut Creek, CA, U.S.A.
BluePay Canada ULC, is a Registered ISO/MSP of Peoples Trust Company, Vancouver, Canada.