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Understanding Chargebacks

The term "chargeback" describes the process that occurs once a customer refuses to accept responsibility for a charge on his or her credit card. It may also be initiated by the issuing bank due to a technical issue, such as no authorization approval code received.

There are many reasons why chargebacks happen, but here are some of the most common. Your customer:

  • Did not receive a product or service
  • Does not recognize the charge or payee on his or her credit card statement
  • Believes the product or service was defective, damaged or not as it was described
  • Was a victim of fraud - his or her credit card was stolen or used without consent

Here are the steps of the chargeback process that happen once a customer realizes there is a problem with his or her transaction:

  1. Your customer contacts their issuer (bank that stands behind the card) and explains the problem, and asks for money back.
  2. The issuer researches the accuracy of the claim. If it is considered unreasonable, he or she is then responsible for the payment, and your settlement funds are not impacted.
  3. If your customer appears to have a reasonable claim, the issuer will make a temporary credit payment to your customer and begins the chargeback process.
  4. During the chargeback process, the card issuer will obtain funds from the respective payment brand, who in turn debits the funds from Chase Paymentech. Chase Paymentech, in turn, will debit the funds from your settlement account.
  5. Chase Paymentech then notifies you about this chargeback. There are two options for which Chase Paymentech can notify you that a chargeback has been initiated: either via the Online Chargeback Management System or via fax services.
    • Fax Services: Chase Paymentech sends you documentation via fax that notifies you about the chargeback.
      • If you fill out and submit this documentation to the satisfaction of the Chase Paymentech Chargeback Analyst, you could get the chargeback funds returned to you. The analyst reviews your rebuttal to ensure compliance with the association rules and regulations.
      • If you do not fill out and submit this documentation, the chargeback automatically moves forward unchallenged and the chargeback funds will not be returned to you.

Learn more about the Online Chargeback Management System.

Chargeback Documentation

Whether you're processing chargebacks via fax services or the Online Chargeback Management System, Chase Paymentech carefully reviews all chargebacks to ensure their validity. In the event you do get a chargeback, you will receive a Chargeback Document from us via fax - otherwise, you will receive notification including issuer documents provided in the Online Chargeback Management system for you to manage and work. This document, or notification, informs you that a debit has been made to your business checking account and gives you the option of accepting or contesting the adjustment. If contesting the adjustment, you will be required to respond by providing all specified information requested on the Chargeback Response form or through the Online Chargeback Management System. Note: The debit occurs upon receipt of the chargeback, and you will be informed once the chargeback has reached a status of "return to merchant" (RTM).

Avoiding and Managing Chargebacks

Chargebacks can cost you time and money - but it's important to remember that although many of them cannot be prevented, many can and often it begins with comprehensive employee training.

Learn more about how to prevent chargebacks.