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A chargeback is when a seller returns funds to a customer’s bank account, credit card, or line of credit because the customer successfully disputed an item on his account transactions report. They can be initiated by either the merchant or the cardholder’s issuing bank. To the extent the merchant cannot prove the transaction was legitimate, then the money is taken from the merchant with an additional fee. If the customer’s claim is proven to be illegitimate, then the money will be taken directly from the customer.

Types of chargebacks:

1. Fraudulent Transaction: A credit card is used without the authorization of the cardholder. Consider using a third-party fraud detection software in order to avoid these transactions as they can be time-consuming and use up precious company resources.

2. Item Not Received: The customer claims the items were not delivered or was not as described. If you are a seller on Amazon and a customer claims the item wasn’t as described, it counts against your defect rate. To lower this rate to the suggested value (below 1%), test your product beforehand. Also, look into a product-tracking service to make sure your items are delivered on time to ensure happy customers.

3. Credit Not Processed: The customer claims to not have received the refund.

4. Technical Problems: This can be if a customer is charged twice for the same transaction or there was a problem with the authorization for the transaction. Technical issues can take time away from your business, so carefully follow your business processes.