Chargeback Series #2: The Way the Cookie Crumbles

Credit card institutions are focused on keeping their cardholders happy. After all, if they keep their customers appeased, they continue to use their cards to make purchases.  In fact, these institutions value their cardholders’ interests, to the point that any form of dissatisfaction or complaint almost always results in chargebacks.

Having an excessive number of chargebacks can lead to the potential termination of your processing account. This will cripple your ability to accept credit card payments and could lead to severe losses for your business. Merchant accounts that become suspended due to a high number of chargebacks are next to impossible to get restored.  Unfortunately, the credit card industry makes it easy for consumers to file chargebacks and transaction disputes, while the merchants are left with very little industry support.

The card issuing bank simply takes the word of the cardholder, without any explanations as to how the merchant got their credit card information.  There is no onus on the cardholder to back up their claim.

Whenever there is a chargeback, there is an accompanying retrieval request.  The retrieval request procedure is initiated when the customer/cardholder or a credit card institution questions a transaction.  The merchant will need to produce a copy of the sales receipt.  As a merchant, it’s your responsibility to keep sales receipts/documentation, not only for tax purposes, but for cases of sales disputes as well.  It is recommended that merchants should retain a copy of their sales receipts for a minimum of 2 years.

Retrieval requests are usually accompanied by information such as the cardholder’s account number, the date of the transaction, the reference number and the sale amount. It’s crucial that merchants respond to retrieval requests with the required documentation, within the specified time given; typical time frames are 10 days to 2 weeks.

The required documentation usually consists of a legible copy of the transaction receipt and/or any related documentation which can prove that the transaction is legitimate.  Documentation could include items such as a sales invoice, rental contract, etc..

The documentation must contain at a minimum:

  • the cardholder’s name
  • the card number
  • transaction date
  • the total sale transaction amount
  • transaction or authorization number
  • the merchant name and location
  • the cardholder’s signature (if available)

When it comes to responding to retrieval requests, timing is of the utmost importance. If you fail to respond, or if you should respond too late, the chargeback requested will be granted to the cardholder.  There is NO acceptable excuse or recourse available to merchants in cases where there was a failure to respond.  Merchants must pay attention to the communications with their processor – ignorance is not bliss.