What is the difference between a chargeback and a refund?

Numerous merchants and consumers around the globe do not have a comprehensive understanding regarding the fundamental differences between a refund and a chargeback. For consumer protection, it is essential for merchants to realize why both options exist for consumers and merchants alike. The following details will not only define both refunds and chargebacks, they will simplify the key differences that merchants must know in order to manage a successful merchant-business.

Let’s begin with the chargeback. A chargeback is a consumer originated recall of funds taken but not authorized beforehand by the merchant. Consumers typically start a chargeback by communicating with their issuing bank or credit card provider. The consumer files a verified complaint on debit items on their credit card or bank statement. An example of a chargeback: when a consumer orders a product using a credit card, the consumer does not receive the product; the consumer then calls their issuing bank in order to remove the charge from their account. Chargeback commonly refers to the return of funds to a consumer, by force, originated by the issuing bank used by the consumer. It is the reversal of a consumer transfer of funds.

A refund is frequently defined as a simple return of funds from the merchant to the consumer. An example of a refund: the merchant does not ship the product after receiving payment; the consumer notifies the merchant of their dissatisfaction with the purchase; and the merchant then issues a credit to cancel the charge.

Simply put, a chargeback is the procedure of a consumer receiving money back by complaining about a transaction. From the merchant perspective, it is then necessary for the merchant to provide real evidence against the complaint. A refund is the settlement between the consumer and the merchant directly, without the issuing bank's participation to return consumer funds.

The chargeback mechanism exists for the protection of the purchaser. Consumers with credit cards issued in the US are afforded reversal rights by Regulation Z of the Truth in Lending Act. US debit card holders are assured reversal rights by Regulation E of the Electronic Fund Transfer Act. Comparable rights range globally, pursuant to the rules recognized by the card associations and banking institutions.

A consumer may initiate a chargeback by contacting their issuing bank, and filing a complaint regarding one or more debit items on their statement. The threat of forced reversal of funds provides merchants with an incentive to provide quality products, helpful customer service, and timely refunds as appropriate. Chargebacks also provide a means for reversal of unauthorized transfers due to identity theft. Chargebacks can also occur as a result of friendly fraud, where the transaction was authorized by the consumer but the consumer later attempts to fraudulently reverse the charges.

Deceitful consumers often abuse the chargeback mechanism at the expense of the merchant. Such as, consumers who experience buyer's remorse, or engage in other forms of friendly fraud, frequently attempt to reverse transactions.

Card issuers who file a chargeback because of identity-theft, do not have an obligation (in reality have financial deterrent) to report the consumer's account as compromised. Consequently, deceitful consumers have motivation to report an unwanted item on their credit card statement as fraudulent.

Chargebacks can occur when a bank mistake credits a consumer bank account with additional funds than anticipated. Banks then must chargeback to fix the inaccuracy. When an overdraft results and it cannot be covered, banks have the option to take legal action. Where there is a direct deposit to an incorrect bank account or the deposit is a higher amount than anticipated, a chargeback is typically conducted to fix the mistake. Chargebacks also occur when an account holder deposits a check and it is returned due to non-sufficient funds (NSF), a closed account, or when it is discovered to be stolen, counterfeit, forged or altered.

Banks may take legal action against account holders when chargebacks are initiated due to fraudulent activity or insufficient funds are in the account to cover the chargebacks.

Using Web Credit Card Processing Can Increase Your Sales

Businesses that are successful will normally offer their customers options like web credit card processing to make purchasing their products easier. Consumers purchasing goods, services or products from a business at an establishment such as a store, retail outlet or shop should be offered payment options such as the use of debit cards, cash, credit cards, checks and more. When customers are offered flexibility, they are more likely to purchase products because they enjoy the convenience.

When you work with GatewayPay.com, you can offer your customer's payment options like web credit card processing that make a major difference. We offer businesses, both large and small, an opportunity to widen the payment options available to customers. We look forward to helping your business find a solution for their online credit card processing. As a company, we understand the developments in technology and have kept abreast of all the changes. We understand that the most successful businesses are working online and now with our help, your business can sell their products online too.

Many consumers around the world use the Internet to search for services, shop for products and spend their money. Companies that are tech savvy are able to take advantage of such opportunities. Unlike a brick and mortar store, companies that offer their products online are always open. This is an enormous advantage that successful businesses are jumping on.

Our online payments gateway will provide your business with the opportunity to accept and process credit card payments across the Internet. This will enable your customers make purchases from your store at any time of the day or night. Using our payments system is pretty easy. It comes with an online shopping cart and does not need extra code or additional programming. All sorts of cards such as Visa debit, MasterCard credit cards, and all other major credit cards can be processed using our Web Credit Card Processing system. This system will get incorporated onto your website within a matter of minutes. Once installed, it will enable shoppers and customers enjoy your services and purchase products from the website from any country in the world. With our web credit card processing up and running, you're almost guaranteed to increase profits and diversify your revenue streams.

Are Off Shore Accounts the Right Move for High Risk Merchant Accounts?

When a business has been categorized for high risk merchant accounts, higher transaction fees are not the only thing to worry about. A business should immediately start to consider what it will take to lower their risk category. Much like a credit rating, it will take time and a plethora of smooth transactions before a business is no longer categorized for high risk merchant accounts.

A company can be given a high risk assessment because of a large number of charge backs and other transactions that lost money. It is also true that some companies, simply by the nature of their business, will be considered high risk.  Areas such as online gambling, travel, online pharmacies, adult sites, downloadable software, loan modification companies, and many others are considered high risk. The most common factors are the speed at which some of these companies startup and fizzle out online, as well as the regularity of high charge backs on credit cards for these businesses. If you find your business as a high risk, you may want to look at an off shore merchant account.

Off shore banks will always have high transaction fees because they inherently take more risk by not doing business in the country of their customer. If there is a default, which leads to the need to pursue money a bank has lost, they are at a disadvantage being offshore and it is more than likely they will end up losing money. This higher risk is factored into the transaction fees. However, a business placed in the high risk merchant category is already going to pay higher rates from local banks and it will often be beneficial to use an offshore merchant account. This is especially true when tax factors are considered. In fact, this tax free solution is often attractive to a business even when they are not categorized as a high risk merchant account. If you find your business in a high risk category for a merchant account, the off shore rates combined with the tax advantages may be the best way to get your business on track with credit card processing.