Managing Invalid Chargebacks with an E-Commerce Merchant Account

Charged-back sales are bad business for everyone involved in the process and the Credit Card Networks of Visa and MasterCard have set up sophisticated chargeback verification systems that greatly reduce chargeback rates and greatly improve the chargeback process. These procedures can also help limit frivolous customer disputes and especially invalid chargebacks, limiting their negative impact on the business' bottom line in the process.

Managing Invalid Chargebacks with an ECommerce Merchant Account

Whenever Visa or MasterCard detect an invalid chargeback, they immediately return it to the card's issuer that initiated it, and the business and its e-commerce merchant account provider will never see it. Most of these providers have also set up systems that regularly review exception items, enabling them to resolve problems before a chargeback is initiated. Together, these systems make sure that the chargebacks that businesses receive are valid or that these that get through can only be resolved by the merchant.

At the same time, even though chargeback validation systems are becoming ever more sophisticated and reliable, there is always a chance that an invalid chargeback will find its way around the system and into your transaction processing statement. In addition, a chargeback may get through the validation systems, as it meets the e-commerce merchant account provider's requirements, and still be invalid. In such cases you need to follow through as fast as possible and re-present your supporting evidence (e.g. sales receipt, invoices, etc.) to your online payment processing provider as a proof that the sale was valid.

Invalid chargebacks simply cannot be entirely eliminated but you can substantially minimize their number by implementing and following through with a set of best practices for credit card acceptance. The way you accept and process credit card orders and other types of electronic payments must be compliant with Visa and MasterCard regulations that were set up precisely to help you limit chargebacks and downgrades (the process of processing non-compliant payments at rates that are much higher than your headline rate).

If the rate of invalid chargebacks is consistently high, even though you have expended all these efforts to limit them and you have received help from your e-commerce merchant account provider, it may just be possible that your processor lacks the expertise to resolve the issue and your best course of action may be to move to another service provider. Make sure that you do your due diligence when evaluating the different prospects and consider all sides of their service. Contact businesses that are currently using your prospective processing provider's platform and try to gauge their rate of satisfaction. Bear in mind that the right processor can save you money and help grow your business.