Chargebacks and Retrievals

Chargebacks and retrievals are both related to customer-disputed credit card transactions.

A retrieval happens when a customer’s issuing bank formally requests specific information from you, the merchant, or from us, the acquiring bank. Each retrieval costs the merchant a fee. They are relatively uncommon but often come as a request for an invoice or a signed receipt copy. Responding quickly with the needed documentation is crucial when you receive a retrieval request. This helps the issuing bank confirm the legitimacy of the sale and can help you avoid a chargeback. So, what is a chargeback?

A chargeback occurs when a customer officially contests a sale with their issuing bank. Chargebacks are troublesome because they bring several negative impacts:

1. Chargebacks cost the merchant (usually twice what a retrieval costs). Chargebacks follow strict Visa/MC/Amex guidelines and involve arbitration between the acquiring bank (Allied Payments) and the customer’s issuing bank. This process incurs internal costs, hence the chargeback fee that is charged to merchants.
2. Visa/MC/Amex monitors frequent chargebacks, which may affect your ability to accept credit cards in the future. High chargeback rates indicate to the processing banks and credit card associations that a business may struggle to work appropriately with customers, labeling it a high-risk business.
3. Even if you ship goods or perform a service, you could still lose the sale’s value. Customers can win chargebacks in many scenarios, especially in card-not-present transactions, which often favor the customer.

How can you prevent chargebacks? Here are some essential steps:

• Address customer complaints promptly. Resolving disputes before the customer contacts their bank can save a lot of hassle and usually avoids a chargeback altogether.
• Consider offering a refund if you believe the customer may win the dispute. It’s more economical to issue a refund than to lose a chargeback. Offering a partial refund or a discount could also ease the loss—getting half is better than none!
• In a card-present environment, always obtain a signed receipt with a detailed description of goods sold or services provided. These documents will be valuable during chargeback arbitration and can work in your favor.
• In a card-not-present environment, always check for fraud! Many chargebacks result from fraud. Setting up AVS and CVV filters, as well as Daily Velocity and Transaction Limit filters, can help you avoid many issues down the road.