As a business owner, there are many concepts you’ll need to know about. Several of them may be on your radar already, but you might not know many of the details about them. Take chargebacks, for instance.

If you’re running the kind of business that regularly needs to interact with a high-risk merchant account, the possibility of a chargeback will naturally be higher. If one ever happens, it might upset you, and you may not be sure what to do about it. It’s helpful to know a few facts about chargebacks if you’re ever in this situation, so let’s learn about them right now.

What Exactly Does the Term “Chargeback” Mean?

First, let’s review the term “chargeback,” since you might not know much about these types of circumstances yet. A chargeback is what happens when the customer of a business, whether an eCommerce or brick-and-mortar one, disputes a charge on their credit card. They might do so because they don’t feel that they agreed to be charged for a purchase, or it may be because they’re dissatisfied with a product or service they received.

The Bank Might Issue the Customer Provisional Credit

When a customer disputes credit card charges via a chargeback, they are lodging a formal complaint with their bank, rather than the merchant from which they bought the product or service. When a consumer does this, the bank might issue the customer provisional credit.

This basically means they’re issuing a refund to placate the consumer, at least for the moment. However, they are still in the process of investigating the transaction. The bank might still decide later in favor of the retailer and not the consumer if they feel that is justified.   

You Must Receive Notification

As a retailer, you should also know that by law, you must receive prompt notification if one of your customers initiates a chargeback for a service or product you provided. You then have the opportunity to do some investigating on your end.

It behooves you to do so. You may agree that the customer was justified in starting the chargeback, or you may not agree, but you can at least try to figure out what happened to prevent a similar incident in the future.  

You’ll Have a Chance to Respond

Once you find out that a chargeback is happening based on a transaction you had with a customer, you can then respond to it as well. You can accept the chargeback without fighting it, but you also have a chance to submit evidence to the bank if you have any that depicts what happened in a different light.

The Bank Makes the Final Decision

The last thing you should know about chargebacks is that the customer’s bank is ultimately the entity that decides who is in the right in these situations and who is in the wrong. If they decide in the customer’s favor, you should regard that as an opportunity to change your policies to make sure this doesn’t happen again.