What is a chargeback?
A chargeback is a way for a cardholder to dispute and potentially reverse a transaction that they believe was incorrect, fraudulent, or unauthorized use of their card.
A cardholder initiates the chargeback process directly with their card issuer/bank, which then communicates with the merchant’s payment service provider, who contacts the merchant.
The card issuer/bank can also initiate a chargeback/dispute, in which case the payment is reversed without the involvement of the cardholder.
Note: A chargeback is not the same as a refund. A refund is when a merchant returns money to the cardholder for a returned item, a defective product, or a service, whereas a chargeback is when the card issuer/bank returns the money to the cardholder because the charge has been disputed.
How Nets helps you as a merchant handle a chargeback
The rules for using VISA or MasterCard are universal for merchants and payment service providers such as Nets. The difference lies in how payment service providers work with merchants to handle chargeback cases.
At Nets, we take a proactive approach, aiming to minimize back-and-forth communication by being clear and informative from the outset.
Standard process for handling a chargeback
Nets receive information about the chargeback ca se from the card issuer/bank.
Nets inform you as the merchant via email and provides detailed information about the case, including order ID, date, amount, type of chargeback, and the required documentation you must submit if you disagree with the chargeback.
You collect and submit the documentation to us within the deadline stated in the emails.
Nets contacts you if there are any questions.
Nets enter dialogue with the card issuer/bank on your behalf to find a fair solution.
The card issuer/bank resolves the chargeback dispute in favour of either you or the cardholder.
Depending on the type of chargeback, you may be debited at the initiation of the dispute and credited depending on the outcome of the case.
The most common reasons for a chargeback
Unauthorized use of debit or credit cards: Criminals use a stolen card to make unauthorized purchases. Customers may also commit what is known as “friendly fraud,” where the cardholder disputes a legitimate transaction to obtain a refund or chargeback even though they have received the product or service.
Consumer disputes: Customers may dispute a transaction if they did not receive the expected goods or services, claim to have cancelled an order or subscription, or believe that the delivered product or service does not match the description provided at the time of purchase.
Processing errors: Incorrect or duplicate charges may occur due to technical issues or human error during payment processing.
Note that there are certain chargeback reasons that cannot be disputed by the merchant.
What you as a merchant can do to prevent chargebacks
Although it is difficult to eliminate chargebacks entirely, there are several security measures you can implement to reduce the risk:
Deliver what you promise customers to reduce disputes about product or service quality.
Use reliable delivery providers to prevent delivery-related issues.
Implement robust payment security measures to prevent fraudulent transactions.
Be alert to suspicious activity, such as discrepancies between billing and shipping addresses.
Set purchase limits to prevent fraudsters from buying large quantities.
Read more: Avoid card fraud in your webshop