Merchant services

3 Key Points You Need To Know About Credit Card Chargebacks

describe the imageCredit card chargebacks refer to a process in which any size transaction can be reversed, after the transaction has been completed. The money has been chargeback from the merchant. A consumer who has purchased goods, or services using their credit card can, if the merchant fails to comply with secure card processing practices, and EMV certifications, issue a chargeback using their credit card company, and the merchant will have to pay the money back to the consumer.

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Of course, the credit card company at this point has already reimbursed the consumer, however, as the merchant, if you cannot prove that you took the correct steps in accepting that specific credit card securely, you will be on the hook for the entirety of that transaction. In addition to the total amount of that transaction, there are typically extra fees and chargeback fees that are tacked on to the total amount.

Although, there are a few cases each year where the chargeback sides with the merchant, however that rarely occurs, counting for less than 25% of all credit card chargebacks. With 75% percent of all chargebacks being paid out by the merchant, it is very important to understand what you need to know, and the practices you must keep in order to protect yourself, and your business against costly chargebacks, that directly come out of your bottom line. 


Merchant Account

In order to get a merchant account, it is required that a few documents are put together, as well as the typical risk and adjudication of your previous months of business. If you are an online business, or even a brick and mortar, and have a history of chargebacks - it will be tough to get approved for a merchant account.

The reason is because the payment processor who you have contracted with, takes responsibility for the types of merchants that they approve. If you have a history of chargebacks in the past, it may reflect that you are not being clear as to what you are charging your customers, or that you have poor payment processing practices, and worst of all, that there is some type of fraudulent activity involved.

All these risks will be addressed and taken into consideration when you are trying to get a merchant account in order to accept credit cards. This is why it is important to be aware of the code of conduct, and EMV certification to protect your business, and your hard earned money.



Having up to date EMV certified, PCI compliant payment processing equipment will help you reduce your annual chargebacks drastically. When a consumer comes in to pay with their credit card, and you pass them your credit card machine that prompts them to insert their card and their pin, they will not be able to dispute that transaction with their credit card provider. This is because; they have not only presented the card to you, but also used their chip card, and manually typed in their pin. It would be very difficult to prove that it was not the cardholder who did that transaction, as the pin and chip security feature protects you against those chargebacks.

Also, making a habit of not accepting over the phone transaction unless the person is able to provide some qualified information over the phone, or has been in the store previously and you can pull up their account on your computer. Card not present, meaning the card was not there when the purchase was manually entered into the credit card machine, typically side with the customer, as they can easily say that they did not make that call, or their card had been stolen etc. 



With the role that the Internet plays in our day-to-day lives, the reputation of your business is very important. No more is a bad reputation spread through word of mouth, mind you it can be, but for the most part, it is spread through online review, blog posts, threads, and social media. If you are constantly receiving chargebacks, it can that the product or service you are selling was not what was advertised, or you promoted one item on your website, and once the customer received it, it was a different item.

All the factors play a major role in your reputation with your customer base. Take pride in your business, and go to every length to make sure that you customers are happy and the service or product that you provide is top quality. Reputation can make or break you.

 Take the time to go through these three important points regarding chargebacks. They will greatly help you reduce costly annual chargebacks, and give you the piece of mind that you are processing vital credit card information the correct way. It is also very important to contract with a professional, credible payment processing provider. Do your research, and ask the right questions when choosing a payment processing provider, and they will be able to help you ensure that your transaction practices are within the code of conduct guidelines, and all equipment is PCI compliant and EMV certified.


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Emily Moore

With seven years of experience in the industry, Emily is the Merchant Boarding and Underwriting Specialist for BNA Smart Payment Systems. She also has experience in credit risk management, fraud and chargeback analysis, and in-depth knowledge of chargeback mitigation. At BNA, she is responsible for reviewing, investigating, and resolving irregular transactions; identifying and analyzing trends; exchanging knowledge of trends with peers and supervisors; and keeping records of past fraudulent activities. With a solid understanding of current fraud trends and software applications, Emily has a methodical approach to problem solving, great attention to detail, and the ability to recognize patterns. As a fitness enthusiast, Emily enjoys CrossFit and playing sports to keep active. She also loves the outdoors and spending time up north.

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