Refunding before a chargeback is issued?

[chodges84]

Hello All,

A customer of mine has just told me she has stopped the credit card payment for a transaction, which will be my first.

In my infinite wisdom I decided to then issue a refund straight away to the customer. The amount is very little, so I'm not worried about the amount, it's the very fact I'll have a chargeback, especially as I am now looking around for a new merchant account as I can no longer boast a 'no chargeback ever' record to them.

My question is, will the bank still issue the chargeback once they have seen that the refund has been issued.

The thing that really bugs me is the customer left me a phone message asking for me to call back at my earliset convinience. I couldn't get to the phone when it rang, but went straight up and called him back (no more than 5 minutes later) and she said she had just rang the bank.

Thanks in Advance

[jweighell]

From what I understand, yes this will stop the chargeback going through. Worldpay are always very helpful if you give them a ring to check...

Interestingly, I'd part refunded an order recently due to one of the items being out of stock. It turned out the order was on a stolen card, and the card owner started the chargeback process. But the bank saw the 'refund' and I won the chargeback!

[Corey Bryant]

Usually yes - if the issuing bank has issued the chargeback to the acquiring bank and charge the acquiring bank, then yes you will have a chargeback

-Corey

[bwnbwn]

If you happen to get the chargeback just fax the refund from the batch it was in along with wording that this was refunded back on such and such date and you will be able to keep the 100% no charge back it was a refund not a charge back.

A charge back is when the processing company takes the money out of your account, a refund is when you issue the money back..your ok.

I really don't see why a customer would care if you lost money on a bad charge but each to our own.

[LifeinAsia]

It depends on the bank. We had a customer dispute a charge 2 weeks after we refunded the money. Several weeks later, the paperwork wound its way through the system to our processor, who then issued a chargeback and took the original amount (plus the chargeback amount) out of our bank account. We had to fight for several weeks, including sending copies of the batch that included the refund to our processing company (even though they already had access to all the logs), before they finally put the amount (except for the chargeback fee) back in our account.

[heliguy]

I'm not sure I am doing the right thing here, but if I suspect a fraudulent transaction I change the status of the order to a query against the customer (fraudster). i.e. I contact them. If they are fraudsters many of them don't reply after 2-3 contacts. I then just leave the money there waiting for the CC company to charge back. I would say I must have £2500.00 in fraud in my bank account of which £500 has been reclaimed in charge backs.

How will these charge back affect my profile in terms of my merchant account?

I know how difficult it could become if I refunded and then they charged me back anyway which seems commonplace with these big companies.

[solly]

Unfortunately, the banks have got us over a barrel. Banks are sometimes slow to respond, so it will depend on a few factors. From what you describe, you will not get a full chargeback. You probably will only get a letter asking you to tell your side of the story. You will probably have to pay for this privilege, but you can tell them you have issued a credit, and you will never get the chargeback.

They also may start the process after the credit is issued, and will stop there.

Or, the customer's bank may be big enough that it doesn't care--they may just refund it to the customer and never initiate the chargeback process at all. For many banks, it is not worth their time to do the work. It all depends on the bank.

But, I think the important thing to remember is: don't sweat it. If you do enough business, you are going to get chargebacks--people are unreasonable sometimes and don't understand the merchant's side at all. Any reasonable merchant account provider will weigh the number of transactions with the amount of chargebacks. And, if you hadn't gotten the letter yet, you really don't have a chargeback...so continue to look for a new merchant account and say you have never gotten one...

[ispy]

If the customer calls in the chargeback the bank rep can convince them otherwise by letting them know a credit has been issued. More often, a customer issues a chargeback by using the form on the back of their statement or online, in this case the chargeback will proceed. When you get your chargeback notice you must send in proof you issued the credit to them, not hard to do as long as you respond in a timely manner. You should be keeping proof of all charges and credits anyway.

Also, once a customer does a chargeback NEVER negotiate directly with the customer or issue any refunds. It has become a legal matter and should be treated as such. It is then up to the bank to decide which party can prove their case through written records (including emails which customers like to use against you at every opportunity).

[FalseDawn]

Also, once a customer does a chargeback NEVER negotiate directly with the customer

Depends on the circumstances, really. I've had a couple of chargebacks that were simply the result of customers not recognizing the name on their statement. A quick Email or phone call later and they willingly contacted their bank and nullified the chargebacks.

Chargebacks that are the result of a lengthy dispute will obviously need to be handled differently.

[ispy]

Thanks FalseDawn, I did not know a customer could reverse a chargeback once it was initiated. Was the reversal before the money was taken out of the merchants account, or after? If before, did you get any verification from the bank that the chargeback was reversed, or did you do a refund based upon good faith? If after, were the funds returned to your account automatically without you having to do anything more?

[FalseDawn]

I believe that the funds are "locked" in some way once a chargeback is initiated. I didn't really dig too deep to be honest, but the issue of a refund never entered into it, as it was a simple misunderstanding.

Edit: by refund, I see you mean "refund of the funds from my own account"

I don't know exactly how a chargeback works in that regard - I don't think the funds are instantly "taken" from a merchant's account - that will be the final result of a successful chargeback, but some sort of "hold" is placed on them.

[cabowabo]

Once a chargeback has been initiated, it can be reversed by the customer. Usually this is done after speaking with the merchant and working out a "deal". I've only had two chargebacks since '99, which is a pretty good record I think.

A customer that does a chargeback without trying to work with the merchant is the worst kind of customer in my book.

CaboWabo

[BluBay]

Dont worry as long as you are under 1% ratio you are fine - 2 chargebacks since youve been doind business is as good as no chargebacks - most merchant account providors understand that having "no chargebacks ever" is impossible, espicially with how easy it with cardholders to initiate a dispute - Used to be they had to fill out a form and fax it in. now that its all electronic consumers have gone chargeback happy!