What Is a Chargeback Fee on Your Bank Statement?
A chargeback fee is a bank fee assessed by your credit-card processor. It occurs when a customer who has made a credit-card purchase disputes the charge with his bank. If you are unable to document the terms or amount of the sale, your credit-card processor will reverse the charge and assess you a chargeback fee.
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About Chargeback Fees
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Chargeback fees are assessed by the bank or credit-card processor that handles your credit-card sales. These fees occur when a customer disputes a charge on his credit-card account; in most cases, the processor issues a credit to the customer, deducts the credit from your account and assesses you a fee. The fee is intended to prevent unscrupulous vendors from running fraudulent charges to increase their short-term profits; the fee is set at high enough level that the business cannot do this frequently without losing money over time.
Costs
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A chargeback is costly to a business, as it causes three different expenses to occur. First, the money that has already been paid to the business is deducted from the account handling credit-card sales. Second, the credit -card processor assesses the chargeback fee, further reducing your account balance. Third, you may have already provided the product or service to the customer, which means that you have lost your wholesale costs until you can retrieve your payment.
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Dispute Resolution
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Chargeback policies differ among credit-card processors. Some work with you, prior to assessing fees, to determine whether you can document the sale and demonstrate that the customer should not dispute the charge. Others automatically issue the chargeback, assess a fee to you and then put you into a dispute resolution process. You may be able to get your money back and reverse the fee, but it requires time and effort on the part of your business.
Reducing Chargebacks
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Your credit-card processor should provide you with its guidelines and processes to follow to ensure that chargebacks are kept to a minimum, although they are rarely reduced to zero. Refine your business processes, in conjunction with your processor, to minimize chargebacks and associated fees. If your business plan requires you to sell to high-risk customers, however, it may be simpler to incorporate ongoing chargeback fees into your business plan.
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