Chargeback

Chargebacks are a customer protection measure. The credit card holder may cancel a charge made to his card, if the transaction is faulty or has been made by third parties. The associated amount will then be credited to his account.

This form of compensation was instituted by financial institutions in order to protect credit card users against misuse. Within a few days after the initial transaction, customers can contest a charge and request a reimbursement. The amount will be debited from the merchant and credited to the account of the client’s account.

Afterwards, the bank contacts the payment recipient to verify the validity of the transaction. These investigations are associated with considerable expense, which are always to the charge of the payee. They can, depending on individual circumstances, be between 20 to 60 euros.

Chargeback and fraud

Misusing the chargeback procedure, or using to pressure the contracting party, is illegal. In the case of unlawful use of the chargeback process, the seller can object to bear the cost of the chargeback. Eventually, irritations between buyer and seller are clarified through a legal process. In the worst case, the credit company may terminate the credit card holder.

Dealers, especially online businesses, might suffer from chargebacks. There are always customers who abuse chargeback. It is notably the case with friendly fraud. Customers order goods or services and pay using a credit or debit card. After receiving their order, they declare that their card or account information were stolen, initiating a chargeback. Not only is the debit amount canceled, but the merchant must also bear the fees, which are often passes on to customers through the price of goods or services.