Charge backs – What are they, and what do I do if I get one?

Charge backs What are they, and what do I do if I get one

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Charge backs are simply when a card holder contacts the issuing bank for their credit cards and ask for a credit. In the case of a single transaction a card holder has 6 months to contact the issuing bank and initiate a charge back. In the case of an ongoing contract the card holder has 6 months from the END DATE of the contract. Most consumers see a charge back as a last resort in the case of a dispute that they can not resolve directly with a merchant. Most merchants see charge backs as a hassle and don't know what steps to take to prevent them or successfully fight one if they have to.

It goes without saying that the best way to prevent a charge back is to listen to your customers and try every avenue to resolve any dispute without getting the credit card companies involved. Whether you offer an exchange or a refund, in many cases taking care of the customer will prevent the costly charge back.

If you do get a charge back notification there are steps that you can take to give you the best chance of winning the dispute. Maybe the most important protection against a charge back that a merchant has is a receipt with the customer's signature. This is critical in proving that you had the right to charge that card. In some cases you will need to provide additional documents, especially if it's for an item that you have shipped. If you took the order over the phone a bill of sale or invoice is necessary, and to further protect yourself it's always a good idea to get a tracking number and history from the service that you used to ship a product. This will help if the card holder states that the merchandise never arrived. If you charge via recurring billing a clearly worded contract with all of the refund policies listed and signed is needed. It may seem like a lot of paper to hold onto, but if you get a charge back and don't have the information you need the cost is far greater than the fee and time. You're also going to lose the money and the merchandise!

Once you're notified of a charge back time is critical. In many cases you have just 7 days to respond. Gather your receipts, invoice, tracking information, or any documents that prove that you had the right to charge the card. Make copies, and label every piece of paper with the case number on the notification. Then give a brief description of why the charge is legitimate. There will be a number to fax everything to, and make sure that you get a confirmation that the fax went through. Don't be afraid to call in two or three days to make sure that everything has been logged in.

Once you've done all of that the issuer will review everything and determine if the charge was legitimate. If they rule in your favor the money will be returned to you. If they rule against you it's credited back to the card holder. In either case you will get written notification of the outcome.

One more critical tip: If you receive multiple charge backs from one card holder DO NOT lump them all together! Answer each one separately and with all the documents. If you try to take shortcuts it will cost you. The charge back departments won't take the time to separate what documents apply to which case. Take the extra time required to make the extra copies and protect yourself.

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