Voids, Returns & Chargebacks
Wednesday, Jul 26, 2017
Voids & Returns
We’ve talked about authorization and settlement, but what happens when someone isn’t happy with their purchase? Maybe they picked the wrong size or maybe they simply changed their mind. Reversing or refunding these transactions are a relatively painless process. Depending on what type of card the customer used and the circumstances, a void or refund can usually be issued.
A void, or transaction reversal, typically happens when a credit card is used for payment and the merchant has not performed their end of day settlement, or batch. A void can be made for the full or partial amount of the original purchase but cannot exceed the original charge.
If settlement has occurred, a refund must be made, and a refund is always made for debit card purchases. Because the funds are immediately deducted from the debit cardholder’s bank account at the time of sale, there is no time to perform a void.
The good news for merchants is that they are never charged a penalty for refunds. An easy return or refund policy is a good way to keep customers satisfied and ensure they will continue to do business with you.
What you don’t want are chargebacks. These transactions occur when a cardholder disputes a purchase. Maybe they didn’t receive their order or simply weren’t satisfied and have no recourse with the merchant.
Another culprit of chargebacks is suspected credit card fraud, and unfortunately, it is on the rise. A large number of these reported disputes are considered “friendly fraud.” This means that a consumer makes an authorized purchase and then attempts to reverse the charges by claiming fraud. Doesn’t sound so friendly, does it?
When a cardholder initiates a dispute with the issuing bank, the bank issues a chargeback request to the processor. The processor issues a fee for each chargeback and guess who gets charged with the fee? The merchant. And the fines can get hefty.
The bottom line is chargebacks can hurt your business. Even a small number of chargebacks may mean that you have some unhappy customers out there. It can cost you valuable time and money trying to manage them. And if they get excessive, you could lose your merchant account or, worse, risk being banished from the credit card associations.
You can always dispute chargebacks through representment if you can substantiate the charge by providing verification of the sale, such as a signed delivery verification. If you can’t, then the consumer will be reimbursed, and you’ll be charged a fee.
It’s best to have sound practices in place to keep from incurring chargebacks. Ask your customers for additional information, such as verification values, to help prevent unauthorized card use and always make sure you have a valid authorization.
If you’re dealing with subscriptions or installment plans, be sure you’re billing methods are clearly communicated and that you quickly acknowledge any correspondence from your customers about cancellations or billing changes.
Maybe the most important piece of advice is to work with a payments partner you can trust – someone who can guide you through the best practices for your business and can help you drive customer satisfaction.