What is a Chargeback?

1. This happens when a cardholder initiates a dispute with their issuing bank regarding a transaction that was charged to their credit card.
2. In a chargeback, money that had been deposited into the merchant bank account is taken back
3. A merchant has the opportunity to respond to the chargeback by presenting documentation to do so.
4. Once the issuing bank makes a final determination based on the information provided, the chargeback is resolved in favor of either the merchant or the cardholder.
5. Draft Retrievals – Bank inquiry process to validate the origin of a charge if it is not clearly known.
   • There is no financial impact with a draft retrieval but, failure to respond has the potential to lead to an unreversible chargeback.

How It Starts

1. The cardholder contacts their issuing bank and disputes the transaction for one reason or another.  (It is either Fraud or Non-Fraud)
   • Fraud – the cardholder claims to have “No” knowledge of the transaction.  There is also this thing called friendly fraud, where someone they know uses their card without their permission.  Sometimes in this case, the issuing bank requires the cardholder to press charges on the individual before a dispute can be done. 
   • Non-Fraud – The cardholder does have knowledge of the transaction, “But” disagrees for one reason or another (ie, dissatisfaction, canceled services, merchandise not received, and the list goes on)
2. Once a chargeback is initiated by the cardholder, Fullsteam is notified by our acquiring bank and begins an email notification cycle around the stages outlined in the next section.

Different Stages of a Chargeback

Below are the 4 stages of a chargeback. The entire chargeback cycle can take from 30 to 120  days depending on the speed of updates from the issuing banks.

Initial Notification  
Fullsteam will send an email notification to the merchant for the chargeback.

All Chargebacks will have ‘Chargeback Notification’ in the subject line.

1. At this time the amount of the chargeback is debited from the merchant’s account.
2. The notification provides a 10-day timeline for the initial response for representation.

Representment  

This is the merchant's opportunity to present their side of the story and provide supporting documentation.
The merchant must respond by the date outlined in the chargeback initial notification (10 days).

• If additional time is needed, extensions can be evaluated by contacting the Fullsteam chargeback team.

This is a very important step where the quality of the information provided is precise and presented in a compact approach is a large contributor to the success of overcoming a chargeback dispute.

This is the only opportunity provided by AMEX to present your case.

• Please see our Best Practices for more information.

The next step can be either a decision or Pre-Arbitration.

Pre-Arbitration - Visa/Discover/Mastercard
If the issuing bank declines the initial submission, the case may go to pre-arbitration. This is a second chance to present more compelling or complete evidence.

** Amex does not have a pre-arbitration process; these cases go directly to decision.

It is important to note that all cases do not enter pre-arbitration, this is contingent on the card brand or issuing bank.

Arbitration – Visa/Discover/Mastercard
In the final stage, at this point, the decision is made by the card network.

1. A fee of $500 - $1000 is assessed to the losing party.
   • This will be listed on their monthly processing statement (card brand fees).
     • This is in addition to the chargeback amount.

Assisting with Evidence

Important things to keep in mind when preparing your response

1. Be honest, if there was an issue of any type, disclose the issue and the steps you took to resolve it with the cardholder.
2. Explain your documentation in full detail, remember the issuing bank reviewing your claim is unfamiliar with your business practices.
   • Explain your documentation, what does it represent?
3. Never speak negatively of the cardholder or issuing bank, be as professional and detailed as possible, and remember the merchant is their own best defense.
4. Be sure to address the card holders’ claim in your response.
5. The requested documents will vary depending on the exact nature of the chargeback.
   • This means there is no one approach to overcoming a dispute
6. All documentation must be presented in one PDF Word document.

Communicate!  Be communicative in response to complaints before they evolve into a chargeback.

Always alert customers of any shipping delays or any issues that may arise with their orders.

Manual Card Entry

1. If a chip card is presented always insert the card into the card reader, NEVER manually enter the card number if all possible
2. If you must manually enter a card number be sure to:
   • Obtain a card imprint on the receipt along with the card holder’s signature and a copy of the identification.
     • Ensure the identification presented matches the name on the card that is being used.
     • It is not illegal to photocopy the picture identification
   • If you are manually entering the card number, ensure you obtain the CVV on the back of the card. 
3. If you are a merchant that accepts online reservations, it is a good idea to have the cardholder present the card used along with matching identification to ensure it matches appropriately.

Online Booking / OTP (Over the Phone) / Cancellations

1. It is good practice to have a cardholder agree/acknowledge a cancellation policy prior to making payment.
   • Issuing banks & card brands want to see where their cardholders were aware of this policy PRIOR to making a payment.

Additional Charges

1. If you are adding additional charges to a cardholder’s bill, be sure they are aware of the additional charges and what they are for and have agreed to them before you charge their card.
   • Notification to the cardholder of any additional charges via email or text message before charging their card is recommended.
2. Always process credits promptly, and do not process a transaction if it was canceled or voided.