How a Chargeback Works
Chargebacks don't occur very often, but when they do, they can be costly and a major nuisance if not handled correctly.
A chargeback is a reversal of dollar value, in whole or in part, for a particular transaction - and usually arise out of a dispute between a business owner and cardholder over a purchase. Let’s take a quick look at the process:
- Cardholder initiates a complaint about a purchase with their card issuer.
- Card issuer contacts the business owner's payment processor, like TSYS Merchant Solutions, to hold or return funds associated with the purchase until the dispute is resolved.
- Next, the payment processor issues a Chargeback Debit Advice or a Sales Draft Request for more information about the transaction.
- A Chargeback Debit Advice is issued when detailed information is needed or when a business owner fails to respond to a Sales Draft Request.
- Strict deadlines have been established by the card associations, and business owners run the risk of forfeiting funds associated with the sale if deadlines are not met so all documentation should be provided quickly.
- Your processor will help handle the chargeback. At TSYS Merchant Solutions, we handle all legwork associated with the chargeback when assisting customers. In most cases, the chargeback is reversed and the business owner receives payment while the card issuer is reviewing documentation with the cardholder.
For more information on the chargeback process, and tips for reducing your risk of being on the losing end of a dispute, view our short Chargeback Tips video below, or check out our whitepaper: Avoiding a Nuisance: A Summary of Chargebacks