You purchase a product, but it doesn’t work or you don’t even get it. So you open a chargeback. How are banks able to just claw back the money you’ve sent?
In: Economics
I feel compelled to chime in. I own a small business and chargebacks suck for me as the vendor.
So: when a customer files a chargeback, the money is immediately removed from the sellers account with their credit card processor, plus a possible fee (depending on the terms you have with your bank. I get a $15 fee just for having a dispute, whether I win or lose it).
The customer also has to give a reason. Basically WHY this is being disputed. The most common reason is “fraud”, and then stuff like “product unacceptable” or “Credit pending” (where the vendor didn’t issue a refund that the customer felt they were owed).
But the chargeback is actually a dispute. I get to dispute the chargeback as a small business/ the vendor. I will literally pull camera footage, signed documents by the customer and even a picture of their social media confirming that the person who came and had services rendered was in fact the card holder (if fraud was the reason).
In my case I take it pretty personally and almost anyone that files a chargeback has been either fraud or friendly fraud since I’m really customer service oriented.
After I upload all my supporting documents to my bank, they then forward it to the customers bank. This part takes FOREVER, it can easily take up to 60-90 days. The customers bank doesn’t have any motivation to process disputes at a speedy rate (their customer already has their money back in their account after all).
Sometimes the customers bank sides with the customer, sometimes they side with me (the vendor). If it’s an American Express card, there’s almost no sense in wasting any effort trying to dispute it through the chargeback system, as they almost always side with the customer.
If the dispute is decided in my favor, I get the money deposited back into my account. If not, then I’m out the cost of the services rendered AND that $15 fee.
Side note: the banks don’t provide me any additional information when it comes to the dispute. I have no way of knowing what the name of the card holder is for sure from the dispute. For that reason we started to physically verify ownership of the credit card for customers that come in. We even have a lower-resolution camera with a large SD card pointing right at the counter to capture the fact that we check the card and the customers face, just for the sake of charge backs.
Most Vendors don’t bother putting in any effort into contesting a chargeback. Most places are so big that they don’t care since it’s not their money. Not me. It’s literally my money since I’m an owner/operator, and it’s literally taking money from my account I use to pay rent and feed my family.
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