What is chargeback ? Chargeback history ? Why chargeback and how to prevent it chargeback ?
Chargeback is a term used in the payment industry to describe the process of reversing a credit card transaction, typically initiated by the cardholder through their issuing bank. Chargebacks can occur for a variety of reasons, including fraud, product or service disputes, or billing errors.
In a chargeback transaction, the funds from the disputed transaction are reversed and returned to the cardholder’s account. The merchant who originally processed the transaction may be liable for the chargeback, which can result in a loss of revenue and additional fees.
The history of chargebacks dates back to the Fair Credit Billing Act (FCBA) of 1974 in the United States. The FCBA was enacted to protect consumers from billing errors and unauthorized charges on their credit card statements. The act gave consumers the right to dispute charges with their issuing bank, and the bank was required to investigate and resolve the dispute.
Chargebacks are initiated by the cardholder for various reasons, including:
- Fraudulent transactions: When a cardholder’s card is used without their authorization or knowledge, they may dispute the charges.
- Product or service disputes: When a cardholder receives a product or service that does not meet their expectations, they may dispute the charges.
- Billing errors: When a cardholder is charged incorrectly, they may dispute the charges.
To prevent chargebacks, merchants should take steps to ensure that their customers are satisfied with their products or services. This can include providing clear descriptions of products or services, ensuring that products are delivered in a timely manner, and offering refunds or exchanges for dissatisfied customers.
Merchants can also take steps to prevent fraudulent transactions, such as verifying the identity of the cardholder and using fraud detection tools.
In conclusion, chargebacks can be a costly and time-consuming process for merchants. By providing high-quality products and services and taking steps to prevent fraudulent transactions, merchants can reduce the likelihood of chargebacks and protect their revenue