A Chargeback is Not Always the Best Option.
After the holiday shopping season wraps up…the New Year’s credit card bill rolls in. For many consumers, the weeks following the holidays can a little tight. Some may opt to return certain items in order to save money.
Most businesses take a “no questions asked” approach to returns, so this is a perfectly acceptable option…assuming you abide by the seller’s return policy. Unfortunately, more and more consumers are taking an illegal workaround to the return process, hurting both businesses and other consumers in the process. Some consumers choose to go through their bank and request a chargeback, or a forced payment reversal.
The Holiday Chargeback Surge
Chargebacks were introduced in the mid-1970s to give consumers a way to recover money in the event of fraud. If you identify a fraudulent charge on your credit statement, you can simply call the bank who issued your card and report the incident. The bank will investigate, then overturn the transaction if it is genuine fraud. Thus, the chargeback process is an important consumer protection mechanism.
The problem: chargebacks weren’t designed with the complexities of the eCommerce market in mind. More often than not, chargebacks are involved in a process called “friendly fraud.” This occurs when a buyer requests a chargeback without proper justification. In many cases, the buyer doesn’t even realize they’ve done anything wrong.
Chargebacks are a year-round problem, but the peak tends to come in late January and February. This is because chargebacks tend to work on a 45- to 60-day cycle. Thus, the sales in holiday sales during November and December equal a surge in post-holiday chargebacks come the new year.
Illegal Chargebacks Affect Businesses & Consumers
Buyers may not understand the difference between a chargeback and a regular return. There is a big difference, though; chargebacks hurt retailers in several ways:
- Lost Revenue: The businesses loses funds from the original sale.
- Lost Merchandise: Unlike a return, the can’t restock the merchandise.
- Added Fees: The seller pays a fee to process each chargeback filed against them.
- Long-Term Damage: The business could lose their right to process credit cards if chargebacks get out of control.
This ultimately drives up merchants’ business costs, forcing them to raise prices on their customers. Plus, frivolous chargebacks could hurt your credibility with the bank. Too many filings, and they may choose to close your account.
That begs the question: when should you file a chargeback?
Proper Use of Chargebacks
There are two primary reasons you should file a chargeback:
- The merchant committed come kind of error, and a chargeback is the only option to recover your money.
- You didn’t authorize the transaction, and it appears to be fraudulent.
If both cases, it’s still a better option to work with the seller whenever possible. The chargeback cycle can be time-consuming; a dispute can take weeks or, depending on the specifics of the case, even months to resolve. But if the merchant does not provide their contact info, or they fail to respond in a timely manner, then a chargeback is the right course of action.
Of course, here are a few examples of scenarios where a chargeback is not appropriate:
- Convenience: Turning to the bank to avoid the hassle involved in the return process.
- Buyer’s Remorse: Regretting a purchase and wanting to reverse it.
- Family Made the Purchase: If a spouse or child uses your card, then it wasn’t unauthorized.
- Confusion: If you don’t understand a refund policy, reach out to the business to ask.
- Forgot the Purchase: Be sure a sale is unauthorized before reporting it.
It’s part of your responsibility as a cardholder to conduct due diligence before requesting a chargeback. So, even when the post-holiday blues set in, you want to continue living up to that standard.
Not sure if a chargeback is the right course of action? Contact eConsumer Services; or tools and strategies can resolve disputes faster and easier than going through your bank. Click below to learn more.