How to win a Chargeback Dispute
How to Dispute a Chargeback
If you are a merchant who accepts credit cards, you are likely to encounter a chargeback from a customer. A chargeback occurs when a customer asks a credit card company to reverse a transaction. Both the bank that issued the credit card (the "issuing bank") and the merchant's bank will review the claim before it is forwarded to the merchant. The merchant has the opportunity to dispute the claim. The chargeback process can take anywhere from one to six months.
Preparing to Dispute a Chargeback
Let your bank review the dispute notice.A chargeback begins when a customer contacts the issuing bank to request that the issuing bank reverse a credit card payment to you, the merchant. Customers request chargebacks for a number of reasons, including duplicate charges for a single purchase, instances where an online order never arrived, or unauthorized purchases made by someone other than the cardholder. The issuing bank will review the claim. If the issuing bank finds the claim to be valid, it will temporarily remove the charge from the customer's statement and forward the claim to the merchant's bank.
- Once the merchant's bank receives the dispute notice, they will review it. If the bank needs additional information about the transaction from you, they will contact you.
Review the reason code.Your bank will forward the dispute notice to you and ask you for information about the transaction. When you receive the dispute notice, check the "reason code." There are different codes for different types of chargeback claims. For example, Visa uses 30 as the code for "Services Not Provided or Merchandise Not Received."
- You can find a list of Discover, Visa, and MasterCard reason codes at .
Gather evidence.You should document your business transactions to the greatest extent that is practical. If you own a brick-and-mortar store, you may have records that the customer swiped his or her credit card and signed a receipt. If you have an online business, you may have electronic records of the transaction and emails between the customer and yourself. Review your records to see whether the dispute is valid. For instance, you might discover that the receipt shows that the customer was in fact overcharged.
Resolving the Dispute with the Customer
Contact the customer.You can try to resolve the dispute with the customer directly. Keep your communication professional. The customer may be upset about the service he or she received, or you might suspect that the customer is trying to defraud you. Focus on resolving the dispute calmly and respectfully.If your efforts fail, you can still dispute the claim.
- Propose a solution, such as a refund, a replacement shipment, etc.
- If you reach an agreement, get it in writing. If you reached an agreement via email, save the email messages as a record of the agreement. If you spoke with the customer on the telephone, send the customer a confirmation email confirming the date and time that you spoke, and the resolution you reached.
Ask the customer to contact the issuing bank.If you and the customer come to an agreement and the customer agrees to drop the dispute, he or she must contact the bank that issued the credit card. Otherwise, the bank will not know that the issue has been resolved, and they will proceed with the chargeback.
Submit evidence for the dispute.If the customer does not follow through in dropping the dispute, you could still wind up losing the dispute.Respond to the dispute notice by sending a letter and evidence to your bank. In your letter, explain why the dispute arose and how you worked with the customer to resolve it. In your evidence, include:
- Emails between you and the customer wherein you came to an agreement to resolve the dispute
- Receipts, proof of delivery, documents showing that shipments have been accepted at that address before, etc.
Disputing the Chargeback Through Your Bank
Write a letter.You will need to write a letter disputing the chargeback and send it, along with documents that support your position, to your bank. The bank will forward it to the issuing bank. Address your letter "To Whom It May Concern" and state that you dispute the chargeback.Then describe the transaction and the records that support your contention that the charge was not an accident, mistake, or fraud.
- When you describe the transaction, give the name of the customer, what the customer paid for, and the date and time of the transaction.
- Describe what your documentary evidence shows. For example, you may have a receipt signed by the customer, which would establish that the purchase was not an unauthorized charge on the customer's credit card.
- You can find a sample chargeback dispute letter at .
Attach evidence.Make legible copies of your documentary evidence for inclusion with your letter. Your evidence might include receipts, proof of delivery, emails from the customer, documents showing that shipments have been accepted at that address before, etc.
Wait for the result.After you send your letter and supporting evidence to your bank, the bank will review your documents and present them to the issuing bank.If the issuing bank is satisfied that you have refuted the customer's claim, the issuing bank will re-post the charge to the customer's statement.If the issuing bank is not persuaded that the customer's claim is invalid, the chargeback will stand.The charge will be refunded to the consumer, and you will be liable for chargeback fees of approximately to .In addition, the more chargebacks you have on your record, the greater the chargeback fees will be.
Go to arbitration.If you lose the chargeback dispute, you may still be able to arbitrate the dispute before a neutral third party. Contact the issuing bank and ask how to submit your dispute to arbitration. The arbitrator will review all of each party's documentary evidence and make a decision. Each credit card has its own arbitration rules and fees. For example, MasterCard requires a 0 filing fee, a 0 administrative fee, a 0 withdrawal fee, and a 0 technical fee. Those fees are imposed upon the party who loses, withdraws , or violates the dispute processing rules.
Consider suing the customer.If all else fails, you can still sue the customer in civil or small claims court. Due to the expense of litigation, it may not make sense to pursue your dispute in court, as you may spend more than you could possibly recover from the customer. If you are interested in pursuing your case in court, consult an attorney.
Do have sample collection letters to customers who did a charge back already so the merchant can collect the debt?
Video: Paypal Chargebacks | How To Win Every Dispute
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