Chargebacks

Overview

Chargebacks are reversals of transactions, mainly on credit cards. There are other forms of fund recovery besides credit card chargebacks, such as wire recalls reversing bank transactions and cryptocurrency recovery.

Credit card chargebacks are among the most common type of fund recovery and require a negotiation process involving several parties, including the cardholder, the merchant or broker, the issuing bank and the the acquirer.

Two Types of Chargebacks

There are two main types of chargebacks. First, there are chargebacks requested in cases of fraud or unauthorized transactions and those that arise from disputes between the cardholders and merchants or brokers. Although the situations may seem more extreme in cases of fraud, it can actually be easier to get a chargeback in these cases because the charges were unauthorized and it is easy to prove wrongdoing.

An example of chargebacks in cases of fraud occur when someone has a credit card stolen, they report the card stolen, and then they see unauthorized charges. Clearly, the consumer was aware there could be a risk of these unauthorized charges because they reported it. Therefore, issuing banks, or banks that issue credit cards, are persuaded in these instances to give chargebacks to consumers. 

However, the issue of chargebacks get more complicated when consumers did not yet report a stolen card. In addition, chargebacks can be a challenge to obtain when charges were authorized. For instance, it can be difficult to prove that the consumer is a victim of fraud if they authorized a charge. Rather than fraud, many of these chargebacks are in the category of merchant disputes, which is the second category of chargebacks. 

Chargebacks that are the result of merchant and broker disputes are usually dealt with by fund recovery services. In clear cases of fraud or unauthorized transaction, the issuing bank will often take care of it right away. The advocacy of a fund recovery service is required more often in cases where there is a disagreement, such as a dispute than in situations that are clear, such as fraud. 

What is The Chargeback Process Like?

The chargeback process involves many steps and it is important to understand the process from the beginning. It begins with a cardholder believing they didn’t receive the service or the product they expected, that it was defective, or it never arrived at all. They should initially bring the complaint to the merchant who will either agree to a refund or will refuse. 

If the merchant refuses, the next step is to discuss the problem with the issuing bank that issued the credit card. The issuing bank will collect information and listen to the case and if they believe it has merit, they will pass it along to the acquirer, who works on behalf of the merchant. The acquirer will give the merchant all of the information about the complaint and merchant is given a chance to respond. 

The merchant may decide at this point to allow the chargeback. If not, the merchant will tell the acquirer that they refuse and give a reason, and the acquirer will then bring the response to the issuing bank. It is up to the issuing bank to decide whether they are going to tell the cardholder that there is nothing that can be done or if they think the cardholder has a valid case. 

At this point, the chargeback process can be stopped or can go further. If the issuing bank decides to pursue the case further, they can. If not, the cardholder can appeal to a financial authority or an ombudsman. They can also try to get a chargeback through a fund recovery service.

What Do You Need to Know Before Starting a Chargeback Case?

Before beginning the chargeback process there are some important points to keep in mind. 

  1. Have all of the documentation you need
  2. Have a plan
  3. Work with a fund recovery service
  4. Have patience
  5. Understand there are no guarantees
  6. However, don’t give up hope

Before pursuing a chargeback, it is important to have all of the supporting documents you need. It is particularly helpful if you have screenshots of texts, emails, or other communication. Be ready to show photographs of the item and any confirmation that it was supposed to have been shipped. Think of the chargeback process as a court case where you will need to provide evidence and you should be well-prepared for it. 

Having a coherent plan and a strategy is essential for chargeback success. This is one reason it is good to work with a fund recovery service that understands the credit card chargeback process well. These experts can map out a strategy and have the connections and experience to make your case persuasive. 

For instance, you may feel like referring to the merchant or broker as a “fraud” but fraud has specific definitions and parameters and to throw around the word  lightly, especially if the issue is a dispute and not fraudulent intent, can work against you. Working with an expert who knows the ropes can improve your likelihood of getting your funds back. 

Patience is definitely a virtue when it comes to credit chargebacks. The process can go quickly, but it can also take a few weeks or even months. The communication between various parties can take time, so don’t be concerned if it isn’t wrapped up in a matter of days. 

Since there are so many variables involved in the chargeback process, understand that there are no guarantees. Cases that have more evidence and are more clear cut are easier than those that may be more subjective. Also keep in mind that the issuing bank needs to take merchants’ point of view into account as well. 

Working with the right fund recovery service can ensure you are well-prepared for the chargeback process with the documentation and evidence you need to pursue your case. These professionals can help you formulate a strategy that is likely to help you achieve your chargeback and to get your funds back from a merchant or broker. 

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