COMMUNITIES OF PRACTICE
How chargebacks can affect your small business They’re meant to protect consumers, but they could be costing you time and resources
C
redit card chargebacks are when a merchant charges a credit card for a transaction and the cardholder later disputes the charge. Chargebacks are intended to protect the cardholder in the case of their card being used for fraud or if the product is not-aspromised. But in some cases, small businesses can become a victim to chargebacks, having to spend time and resources to prove a transaction was legitimate.
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bank. The cardholder usually contacts the issuing back to request a chargeback. The bank will then communicate the claim to the merchant. The bank gives a specified window of time for the merchant to respond before the funds for the transaction in question are reversed. If the merchant doesn’t respond, the chargeback is typically granted and the merchant assumes the monetary loss.
How does a chargeback work?
How do chargebacks affect small businesses?
A chargeback involves three parties: the cardholder, the merchant and the issuing
Since the merchant carries the burden of proof in a chargeback dispute, the merchant
AUCTIONEERS.ORG
must provide compelling evidence showing that the charge was valid. Finding and providing this evidence can take time and resources away from a small business if they choose to dispute the cardholder’s claim. Even though chargebacks are in place to protect consumers from erroneous charges and untrustworthy merchants, dishonest consumers sometimes make false chargeback claims. This is known as “friendly fraud,” according to creditkarma.com. Jason Winter, CAI, AARE, AMM, CES, owner/auctioneer at West Central Auction Company in Harrisonville, MO, said that chargebacks are, unfortunately, a cost of doing
