Chargeback

Question 1

Chargeback - Definition

Answer 1

A chargeback is the process in which a cardholder disputes a debit or credit card transaction with their Issuing Bank, instead of the merchant, in order to claim a refund or recover potential fraudulent charges

Question 2

Where does the word come from?

Answer 2

The issuer will ‘charge it back’ from the merchant via the acquirer, reversing the flow of funds

Question 3

Common Reasons for Chargebacks

Answer 3

1. Stolen Credit Cards
2. Friendly Fraud: They did initiate the transaction but don’t recognize it
3. Customer Dissatisfaction
   - Product not delivered on time
   - Product was broken
   - INR (Item not received)
   - SNAD (Significantly not as described)

Question 4

Merchants has two options when faced with a chargeback

Answer 4

1. Dispute
2. Do Nothing

Question 5

Steps to prevent chargebacks

Answer 5

1. Good return policy
2. Collect more information about the consumer
3. Ask for CVV number
4. Ask for their billing address
5. Asking consumer to transact with their EMV chip will reduce chargeback burden
6. Get a good fraud detection and prevention system

Question 6

Lastschrift zurückgeben

Answer 6

Sie haben bei comdirect nach der Abbuchung einer Lastschrift von Ihrem Konto bis zu 8 Wochen Zeit, der Lastschrift zu widersprechen und die Erstattung zu verlangen

Question 7

Chargeback Definition

Answer 7

A chargeback is a process which can be invoked by a cardholder through their Issuer to get the transaction amount back from the merchant for a disputed purchase

Question 8

What happens if a merchant fails to defend a chargeback within the specified time period?

Answer 8

Their bank account will automatically be debited. The debit was actually applied at the start immediately by the acquirer and the funds were on hold

Question 9

Chargeback Reason Code

Answer 9

Description that must be provided as part of the chargeback request to help the merchant provide the correct information in defence

Question 10

Chargeback Ratio

Answer 10

Number of chargebacks filed against a merchant in a given month against their total number of transactions in a given month

• Acquirers generally consider the card scheme thresholds for the chargeback ratio (0.9% Visa, 1% MC) to be critical but are free to impose stricter rules on their merchants
• Anything above 0.65% is considered an early warning
• Greater than 1.5% is considered excessive

Question 11

Merchant Monitoring Programms

Answer 11

Merchants on the programs will incur monthly fees

Question 12

Acquirer Responsibility

Answer 12

The acquirer is responsible for helping their merchant reduce their chargeback ratio to an acceptable level and may even place a hold on the merchants funds if they deem the ratio excessive

Question 13

Friendly Fraud

Answer 13

Cardholder tries to get money back on a purchase they made

Question 14

Chargeback Activism

Answer 14

Activists raise chargebacks to punish a company for ideological differences