DISPUTES & CHARGE BACKS – A GROWING THREAT

A charge back / dispute is when a card holder contacts their bank to file a claim to have their funds returned on a credit card or debit card transactions.

Why might a customer dispute a charge? Fraudulent activity, Dissatisfaction with a product or service, Errors made by the business, Unauthorized transactions, and Nondelivered of goods or services. 

What are the consequences for businesses?
Chargebacks can result in financial losses, damage to reputation, and higher fees from payment processors. 

Have you had a charge back yet? If not, statistically it a matter of time. According to data found in Chargebacks911’s annual Cardholder Dispute Index, in the United States alone, cardholders on average disputed about six transactions throughout 2023. This means an astounding $65.21 billion worth of transactions were overturned through chargebacks.

When you factor in Visa’s report that up to 75 percent of all chargebacks are a form of chargeback abuse or misuse—commonly known as “friendly fraud”—and that each dollar lost to friendly fraud costs merchants more than three times the transaction value in fees, fines and lost merchandise, according to LexisNexis, this means that U.S. merchants lost more than $183 billion last year to illegitimate chargebacks.
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Also, the Merchant Risk Council issued a critical alert regarding a surge in organized chargeback abuse, meaning that methods to game the chargeback system are becoming widespread and more malicious. With retailers only winning 18 percent of their chargeback representation cases and cardholders facing essentially zero consequences, the problem is approaching uncontrollable levels.
A business cannot stop a cardholder from initiating a charge back / dispute. What you can do is always keep good records of all transactions, invoices and the terms of your sale. In other words what records do you have if you need to “defend” the transaction? Make it your standard operating procedure that every transaction will be disputed and you have the records available.

A good resource to refer to is: Dispute Best Practices Guide October 2024
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We are here to help your business by helping you flight disputes. In addition, by giving you competitive rates and great service. Give us a call at Tampa Bay Merchant Service 727-748-4181

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