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What is a chargeback?

A chargeback is a reversal of a credit-card transaction — not because the product was returned or because the sale was never completed, but because there was some problem processing the transaction. Often, a chargeback means the merchant ended up providing a product or service for free — and had to pay the merchant bank for the privilege. Common reasons for chargebacks on credit card merchant accounts include:

Customer disputes
Fraud
Authorization issues
Processing errors
Failure to fulfill copy requests

Merchants, of course, hate chargebacks. When you shop for a credit card merchant account, pay attention to the merchant bank’s chargeback rules. A good merchant bank will take chargeback management seriously and provide chargeback protection for its customers. Here are some other ways you can help prevent chargebacks:

Take customer satisfaction seriously, and strive to meet customer expectations about what products or services you will provide, when you will charge their cards, and preventing fraud within your own operation.
Be sure your staff is trained not to process transactions with declined authorizations or without customer signatures.
Never estimate charged amounts, and be sure the customer sees the final total (including tips and other add-ons) before the card is charged.
Be sure the transaction information on the sales receipt is legible.
Ship merchandise before processing credit card transactions.
Be vigilant about voiding duplicate transactions added in error, and take steps to secure credit-card deposit information to avoid the possibility of employee fraud.
Disclose return and refund policies clearly before a sale, and be prompt about cancelling transactions when customers request it.