General Credit Card Processing Questions
Q. What is a chargeback?
A chargeback is where a customer is disputing a charge listed on their credit card statement. A chargeback may get the customer their money refunded, but it is not a refund. Avoid chargebacks at all costs because they can ultimately end up in a merchant loosing the ability to process credit cards completely.
The customer will contact their credit card issuing bank to notify them that they want to dispute a charge. The card issuing bank requests a chargeback from the processor who takes the amount of the purchase from the merchants bank account. The merchant will then be sent a letter that notifies them of the chargeback and requests further information from the merchant. The merchant will need to provide the requested information to the processor who will then make a decision on whether the customer deserves to get a refund.
Chargebacks can be initiated for a variety of reasons. The most common reason is that a customer doesn't recognize or doesn't remember the name of a merchant listed on their credit card statement.
A chargeback can be initiated 6 months after the completion of the sale. This means that if you provide a service that lasts 1 year the customer can chargeback the transaction 6 months after the service is completed, one and a half years after the sale itself is made. This is why chargebacks are more common with long term or custom services.
Common Chargeback Reasons:
- Not recognizing merchant's name on credit card statement.
- Customer charged more than once for the same purchase.
- Merchant did not deliver the agreed upon service.
- Customer unsatisfied with product or service.
- Fraudulent orders (mainly internet businesses).
The best way to challenge a chargeback is to first contact the merchant to try and figure out why there was a chargeback. Many times the merchant will withdraw the chargeback. Other times the merchant only asked their bank if they knew what the charge was, and the bank initiated the chargeback without the merchant even knowing. Next, get the required paperwork together and send it to the processor. This information must reach the processor within 10 days of receiving the chargeback letter. The required documents will be listed on the chargeback letter. It is important to cooperate fully with the processor to resolve the chargeback. Remember, it is not the processor that is issuing the chargeback, it is the card issuing bank or the customer. Getting angry at the processor, who is trying to help your business, will only further complicate the process.
You may not win every chargeback and your business may never get a chargeback, but operating your business under good standards and having good customer relations will improve your chances of not getting a chargeback in the first place. Also make sure your customers know your business name and return and refund policies, to avoid simple misunderstandings.
Q. How long does it take for funds to be deposited in my account?
Funds will be available in your bank account normally between 24 to 48 business hours from the time that a batch is received by the processing bank. It is a common misconception that funds will be available 24 to 48 hours after a transaction, but this time is actually measured from the time of the batch.
Once a batch is received by the processing bank, the funds transfer is initiated. The funds are withdrawn from the customers account almost immediately, and the merchant's bank will hold the funds for 24 to 48 hours until the transfer is finalized. This wait period is also a fraud prevention measure. Sometimes a merchant's bank will have a policy to hold the funds for longer than 48 hours. There is nothing that the processor can do to speed up the transaction. If this delay is a problem, the merchant should talk to the bank and see if they can stop the transfer hold. If they cannot, the merchant should find a new bank for their checking account. Changing processing companies will do nothing to help eliminate this delay in the funds transfer.
When transactions are processed on the weekend or holiday, the funds will take extra time for the transfer. The banking systems are closed on the weekends, which causes the delay. Again, changing processing companies will not speed up the transfer of funds for transactions processed on the weekend or on holidays.
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