What is a Chargeback?

Picture this: You’ve just had a great day at your café. The tills have rung steadily, customers left happy, and everything seemed to go off without a hitch. But then, a week later, you receive a notice. One of those transactions is being disputed the customer claims they didn’t authorise it. Now, your bank has started a process known as a chargeback.

A chargeback occurs when a customer disputes a payment and their bank demands a refund on their behalf. It’s a way for customers to reverse a transaction, and while it’s meant to protect consumers, it can leave businesses facing the hassle of lost revenue and additional fees.

Chargebacks can be frustrating, but with a little understanding, they don’t have to take over your day. At Live Payments, we’re here to help you navigate the process and even prevent chargebacks from happening in the first place.

Why Do Chargebacks Happen?

No two chargebacks are quite the same, but there are some common reasons why they occur. Let’s walk through a few scenarios:

• Point of Sale Error: Perhaps your staff accidentally keyed in the wrong amount at the till. The customer notices the discrepancy later and raises a dispute.
• Duplicate Transaction: Sometimes, the same transaction can accidentally be processed more than once, leading to confusion and a chargeback request.
• Goods Not Received: A customer claims they didn’t receive the product they ordered. This is common for delivery-related businesses.
• Cancellation Not Processed: The customer cancelled a direct debit, but it wasn’t updated in time, leading to unauthorised charges.
• Card Fraud: In unfortunate cases, the customer might not have authorised the transaction at all due to theft or fraud.

Each of these situations could lead to a customer disputing a charge, and without the right documentation or process in place, the business could be left holding the bill.

The Chargeback Process: How Does it Work?

So, what happens once a chargeback is initiated? The process follows a structured path:

1. The Customer Disputes the Transaction: The cardholder contacts their bank, explaining why they believe the charge is invalid.
2. The Bank Notifies the Merchant’s Bank: This triggers the dispute process, and your bank gets involved.
3. The Dispute is Reviewed: The merchant (that’s you) will be asked to provide evidence, such as transaction records or receipts, to prove the charge was valid.

At this stage, one of two things can happen:

• If Successful: The bank sides with the merchant, and no refund is issued.
• If Unsuccessful: The chargeback is processed, and the customer is refunded. Unfortunately, you’ll also likely face a fee for the chargeback.

But here’s the catch customers can dispute a charge for up to 12 months after the transaction date. That’s a long time to hold onto your records, but doing so can save you a lot of trouble down the line.

How to Prevent Chargebacks: Protecting Your Business

Now for the good news: There are plenty of ways to reduce the risk of chargebacks and keep your hard-earned revenue where it belongs. Here’s how to protect your business:

• Keep Clear Records: Always hold onto receipts that show the customer authorised the transaction. For card-present payments, this might be a signed receipt or proof of PIN authorisation.
• Direct Debit Documentation: If you process recurring payments, ensure you have a signed authorisation form from the customer.
• Invoicing: Send detailed tax invoices to your customers. If a dispute arises, you’ll have proof of what was agreed upon.
• Customer Communication: Keep a record of all communication between you and the customer especially around payment. This can be invaluable in defending your case.

One more thing sometimes, it’s best to reach out to the customer directly. A friendly call to clear up any misunderstandings could be the key to having the chargeback withdrawn before it gets escalated. After all, most disputes stem from confusion, not ill intent.

Even with Documentation, Chargebacks Can Happen

Sometimes, even when you’ve done everything right, a chargeback may still occur. The cardholder might win the dispute, and at this point, Live Payments will raise a chargeback against your bank account. Unfortunately, this process can also include a fee of $33.

While it’s not the outcome anyone wants, having a clear plan in place to respond to chargebacks and managing your records can help keep these events rare and manageable.

We’re Here to Help

At Live Payments, we understand that chargebacks are just one of the many challenges that small businesses face. That’s why we’re here to provide support, clear guidance, and practical solutions to make payment disputes easier to handle.

If you need help navigating the chargeback process, our team is just a call or email away.

• Phone: 1300 780 788
• Email: help@livepayments.com
• Sign-up Page: Sign up for Live Payments

By understanding the chargeback process and taking preventative measures, you can stay ahead of disputes and keep your business running smoothly. After all, we’re in this together.

‍