Reasons why customers file chargebacks
A chargeback protects customers, but some customers can also use it in a tricky way, not always with good intentions. Do you know the reasons why customers may initiate disputes?
The reasons that you can see on your SecurionPay dashboard are: FRAUDULENT, UNRECOGNIZED, DUPLICATE, SUBSCRIPTION_CANCELED, PRODUCT_NOT_RECEIVED, PRODUCT_UNACCEPTABLE, CREDIT_NOT_PROCESSED, GENERAL.
Let’s get through the reasons and learn more about what they mean.
The chargeback is marked as FRAUDULENT when the cardholder didn’t authorize the charge. Fraud is one of the most common chargeback reasons and one of the most difficult to dispute from the merchant’s perspective. It occurs when a third party uses stolen card details to make a purchase.
So, when a cardholder notices on their bank statement that someone used their card, they contact their issuing bank and report the fraudulent transaction. They are into the chargeback dispute process, so they need to prove that someone has used their card details without their authorization.
Chargebacks with the UNRECOGNIZED status are similar to fraudulent ones and occur when a cardholder doesn’t recognize the transaction on their bank statement. The main difference is that it’s not about the account that has been compromised, but that a cardholder is not able to recognize the purchase or the merchant.
In this case you may contact the customer as they might have forgotten about the purchase, or the purchase could have been made by their family members. This is why having a clear transaction descriptor is so important.
If the customer agrees that the charge was legitimate, ask them to contact their bank and cancel the dispute. Plus, you should submit evidence and the cardholder’s statement that they agreed to drop the chargeback.
When the chargeback is marked as DUPLICATE, the customer claims that you charged them twice for the same item. If it’s true, you need to accept the chargeback, but sometimes a customer is charged for two different products. This means that you need to submit evidence showing that the two charges are for different products.
Reason: Cancelled subscription
A chargeback marked as SUBSCRIPTION_CANCELED usually occurs when the customer was charged after canceling the subscription. It usually comes with misreading or misunderstanding the subscription terms and conditions or when the customer expected a notification before each recurring charge and didn’t receive one.
However, it may also happen when there’s hidden information on your website that the customer will be charged automatically after the free trial ends. The same goes for unclear or undisclosed billing procedures.
Keep in mind that sometimes customers file a chargeback even after receiving the product or service and it’s driven by the intention to get the product free, so you should always gather as much evidence as possible.
Reason: Product not received
This happens when a cardholder claims that the item they purchased wasn’t delivered (it’s marked as PRODUCT_NOT_RECEIVED). A similar situation may also happen when the customer isn’t satisfied because a product or service wasn’t as described.
A good practice is to contact the customer and resolve the issue. If it’s impossible or the customer still claims that they didn’t receive the product, submit evidence proving that the product or service was delivered (such as shipping and tracking information or an activity log if the product or service was digital).
Reason: Product unacceptable
When a customer receives the product or service and claims that it’s not as described or came in imperfect condition or quality, they can file a dispute marked as PRODUCT_UNACCEPTABLE.
You can try to resolve the problem with the customer by asking them to return the product or cancel a subscription to replace it with another item. If the customer agrees, send evidence that the issue is resolved. If not, prepare evidence to prove that the customer received the product as described.
The tricky part is that a cardholder can also use this reason if they didn’t read the descriptions carefully or misinterpreted the advertisement.
Reason: Credit not processed
When the chargeback is marked as CREDIT_NOT_PROCESSED, it usually means that the customer returned the product or canceled the transaction and didn’t receive a refund from you.
Keep in mind that you can’t make a refund after the customer initiates the dispute, so you can try to contact them, explain the issue, and find a way to solve it.
Speaking of refunds, you should also remember the so-called friendly fraud. Wondering what the reasons for friendly fraud are? Get the answer here: Friendly fraud — how to get your money back.
If the chargeback is not valid (because, for instance, you refunded this charge before), gather evidence to prove that you’ve displayed the refund policy to the customer, and attach any correspondence with the customer about the refund.
So, we recommend contacting the customer to resolve the problem. Otherwise, you need to prepare detailed and relevant evidence proving that the charge was legitimate.
As the name implies, GENERAL chargeback is a dispute that doesn’t fit into any other category.
Chargebacks cost more than just loss of sales
The customer isn’t always right.
When you understand the reasons for chargebacks, it helps you protect your online business from fraudulent activity. No matter what the chargeback reason be, you need to know how to react when it happens and what you can do to improve your win rate.
Act promptly and send as much evidence as possible to the bank to prove that the transaction was legitimate. To do so, log in to your SecurionPay account and go to the Charges tab on the dashboard. For more information check out How to win a chargeback dispute.
What may also happen is a retrieval request, known as a soft chargeback. So before the issuing bank decides to file a chargeback, it can request additional information about the transaction. What is a retrieval request?
Latest posts by Sandra Wróbel-Konior (see all)
- High-risk merchant account — what it is and how it works - November 14, 2019
- Reasons why customers file chargebacks - October 23, 2019
- New chargeback thresholds and how to reduce fraud - October 14, 2019