Charge Backs and the Price that is Paid

By: Sarah Carlye

A merchant can look great on paper one month, but down the road, the final calculations for the month can look bad. The reason for this is charge backs. A charge back is when funds were given but then taken back. This happens when a transaction occurs, it is paid, and then upon further investigation, it wasn’t done properly and the card issuer is not responsible for collecting the funds, it is the merchant’s responsibility.

When a transaction is reversed, it will play havoc with accounting and it can quickly become the source of headaches for a merchant. The process of a transaction:

* A customer purchases merchandise or services and pays for it with their card
* The transaction is approved and the customer leaves with the merchandise
* The cardholder is freed from financial responsibility for items
* The card issuer subtracts the amount from the cardholders account
* The merchant receives the credit on his or her account
* It is determined that the transaction has not been processed properly
* The merchant is now responsible for the amount and the amount is now subtracted from the merchant’s account

Not only does the merchant have the chargeback, there is usually no way to retrieve the merchandise. In addition there are costs to the merchant for the internal processing of the transaction. The merchant is very much on the loosing end in this situation.

The most common reasons for charge backs include the following:

* Fraudulent use of the card
* Customer dispute regarding purchase
* Processing errors and mistakes
* Improper card authorization
* Nonfulfillment of copy requests for fraud or illegible)

Charge backs are going to happen just because a merchant is doing business in an imperfect world with imperfect people. It just won’t be able to be prevented completely. What can be done is that the charge backs be reduced as much as possible.

With Merchant Data Systems, you won’t be fighting the fight against charge backs alone. You will have assistance with processing your cards and checks. You can talk to a representative and apply today to start receiving the services that Merchant Data System offers.

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Read More about Charge Backs and the Price that is Paid. For more information about credit card processing and merchant accounts, visit Merchant Data Systems today.

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