Friendly Fraud?

How To Dispute A Charge

Consumers who want to dispute charges on their credit cards can use the chargeback process for several reasons. In the first, a fraudulent transaction can be disputed if the card number was stolen and an order was placed illegally. In the second, a transaction can be charged back if there was an issue about the item's quality, or the service was not provided as advertised or agreed.

Leverage or An Endorsement

Credit Card ChargebackConsumers have a lot of power when making disputes with credit card charges, and the chargeback process has increasingly become a first resort for customers. There are even people who dispute every transaction in the hope that business owners will not fight the charge, and they can get the item for free in the form of "friendly fraud." Nonetheless, there are several services out there that will lobby on behalf of the business when disputes happen. During the dispute process, the complaint is made to credit card customer service for the item or service charged. The merchant is then sent a form asking them to provide proof that the product was provided or the service rendered, and was not the result of credit card fraud. The four main reasons for card disputes include expired authorizations or bank errors, duplicate billing or incorrect amount entry, quality dispute, or fraud, which is most often claimed as identity theft. Credit card processors are always on the lookout for companies with a high chargeback percentage because it may indicate that services are not delivered as promised, or a lot of stolen card numbers are used.

Chargeback Prevention for Merchants

Merchants can avoid chargebacks by having a clear and understandable return policy, and by communicating with customers. While there will always be some cases where dishonest customers dispute charges in order to get "something for nothing" there are also cases where the consumer has exhausted all other dispute avenues.

Business owners can take several other steps to avoid retrievals and disputes. A chargeback policy can be spelled out in a contract if credit cards are taken as a form of payment for B2B services, or other contracted items. Payment by EFT or wire transfer may be another way to get around credit card processing rules, which tend to favor the consumer even when he or she is dead wrong. The cost of taking back an item and giving a full refund, even when it creates a small loss, is still less than the time and money involved in card disputes. Essentially, when a customer makes a complaint to their card issuer you have to pay a fee, spend a couple of hours tracking down the order (and the people who took it or spoke to the customer) and then writing up your own version of events. Even with all this, you can lose, and excessive chargebacks can inflate your cost of processing credit cards.