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Learn why chargebacks happen, how to prevent them, recommended documentation, their statuses, among other related topics.
Why does a chargeback happen?
The most common reasons for chargebacks are as follows:
- Unrecognized charge: the cardholder does not remember or recognize the transaction.
- Goods or services not rendered or delivered.
- Duplicate charges.
- Incorrect amount.
- Billing or processing error.
- Unperformed refunds.
- Deceptive and dishonest behavior.
- Fraud: the cardholder did not authorize or participate in the transaction.
How to prevent a chargeback?
Here are some tips to protect your merchant from chargebacks:
- Identify the buyer and link their information to the card: to demonstrate that the payment is legitimate, request identification details from your buyer to link them to the card. Ideally, the person making the purchase should be the card owner.
- Verify the delivery of the product or service (ideally to the card owner): ask the customer to sign for the product upon delivery.
- Present your merchant information: If the buyer does not recognize the charge on their card statement, they might initiate a chargeback. To avoid this, define how you want your merchant to appear on card statements.
- Send the purchase receipt via email or text message: this will help your customer recall the purchase they made.
- Refund suspicious payments: If you detect irregular behavior, it is best to cancel the sale and refund the money. This prevents chargebacks. Similarly, if we detect irregular behavior not aligned with your security rules, we won't allow the transaction to proceed.
- Use fraud prevention tools: at Kushki, we employ tools like SiftScience for fraud prevention. This tool identifies suspicious behavioral patterns and prevents the payment from happening.
- Implement authentication controls: In Kushki, we offer our authentication service to minimize the risk of theft or third-party card use. Consult us for details on the service.
- Always have a sales backup for amounts over $300: We recommend having a backup for amounts equal to or exceeding $300 or the equivalent value in the local currency.
In the case of card-present transactions, consider the following suggestions:
- Cardholder should know and validate their PIN (Personal Identification Number): ensure that the PIN is not entered incorrectly more than 3 times.
If the card is declined, do not attempt more than 3 times: it is preferable to request another card for the transaction.
Verify the agreed-upon amount before processing the transaction.
Do not provide cash refunds: all refunds should be processed through the same method used for the purchase.
Avoid duplicating transactions: confirm that there is no duplication of any charges.
Prohibit self-checkouts (cashback).
Do not split total amounts.
Keep a record of your sales.
Have cancellation or return policies in place.
What happens when I receive a chargeback?
When your merchant receives a chargeback, Kushki will temporarily withhold the total transaction amount. This amount will be refunded if the clarification is resolved in your favor by the end of the cycle; otherwise, the charge will become permanent.
You will be notified of the received chargeback via email, and it will be visible in your console. The email will include transaction details, the chargeback number, and the operation date, allowing you to identify it. You can also attach necessary documentation to support the sale.
Kushki will submit the documentation to the issuing bank to represent the transaction.
Within a period of 30 to 120 days, we await the issuing bank's response regarding the clarification's outcome or status. Upon receiving a response, the final ruling is provided to your merchant.
Where can I verify if I received a chargeback?
When you receive the notification of your chargeback via email, you can view it in your Console. Your account executive will provide information, and you will see three statuses:
- In Process: clarification in progress.
- Resolved: in favor of the merchant.
- Against: documentation does not support the sale, and the charge is final.
For what payment methods do chargebacks apply?
Chargebacks only apply to transactions made using card payment methods, whether it be debit or credit cards.
How can the cardholder initiate a chargeback with the issuing bank?
The cardholder should take the following actions:
- Contact the issuing bank of their card, either by phone, chat, or by visiting a branch. They should report their dissatisfaction with a particular transaction made with their card.
- The issuing bank initiates the chargeback process and notifies the acquiring bank, which, in turn, requests the payment gateway to collect evidence held by the merchant to address the chargeback.
What supporting documents should I send if I receive a chargeback?
In disputes for chargebacks, we request that you provide as much supporting documentation as possible to demonstrate that purchases were made by the cardholder. It is crucial to include evidence of the cardholder's participation in the transaction. Therefore, we ask for your cooperation in attaching the following information:
- A letter from the establishment detailing buyer information (name, identification, email, phone numbers, among others) and a detailed explanation of the product or service sales process.
- The customer's IP address to demonstrate the cardholder's participation.
- A legible copy of the sales receipt or invoice; and supporting documents about related operations or detailed transaction records.
- Order/purchase/order picking.
- A copy of the ID of the person who received the product or service, with this person being the cardholder.
- Shipment tracking detailing the delivery address of the product or service.
- A legible copy of the product or service delivery order signed by the cardholder with a conforming signature.
- If it's an establishment providing lodging, travel, or entertainment services; you should provide a legible copy of the record of products or services sold, work order, accommodation folio, hotel registry, ticket, or transport document, as applicable.
- Electronic promissory note.
- Service contract.
- A signed letter from the cardholder authorizing the charge or recurring charges. Please provide details about the product or service acquired by the customer.
- Signed terms and conditions by the cardholder.
- Signed cancellation and return policies by the cardholder.
In the event that the transaction has not been successful, please send a letter or email informing us of this situation and authorizing the corresponding adjustment. It is important that your response in a clear and precise manner indicating the approval number of the disputed transaction and includes a comprehensive list of all supporting documents accompanying this request.
What are the stages of a chargeback?
There are various stages that can be viewed in Your Console regarding transactions that are in the chargeback process:
Initiated: when the user uploads documentation for representation, and Kushki validates that it is correct.
Under Review: when a clarification verdict is obtained, after 90 natural days have passed. From this stage, the following sub-stages can arise:
- Won: in favor of the merchant.
- Lost: in favor of the cardholder or against the merchant.
- Expired: when the user does not upload documentation to represent the chargeback within the specified time. There is no way to represent it anymore
We recommend the following articles to supplement the information in this article:
Chargeback Process and Flow: An article providing a general description of the chargeback process.
Chargeback Management: In this article, you can learn about the process for checking your chargebacks in your console and how to download reports related to them.
Fraud Detection Tools: This article introduces fraud detection services as an additional level of protection.