Small Business

Companies versus Chargebacks: How Your Business Can Avoid this Situation

A business that has a credit card option for its transactions is at risk of chargebacks. What is a chargeback? It occurs when a shopper cancels a purchase they made, and they receive their money back in return.

Its purpose is to keep customers away from exploitative business owners. However, some customers can take advantage of this.

Because there is loss of money involved, it can cause damage to your business. Aside from getting financial protection from a smart payment processing company like Payjunction, there are other ways you can avoid chargebacks.

Familiarize yourself with the reason codes

Although it is easy for customers to file a chargeback, they have to give a valid reason for it. Customers must provide the credit card provider with the reason, and the credit card provider will notify the merchant. The chargeback may only push through if the customer can state any of the following reasons:

1.  Technical chargeback: Outdated authorization of cards, lacking funds, and mistakes in the process of banks are the grounds for this type of chargeback to happen.

2. Clerical chargeback: This chargeback takes place due to identical invoice, an error in the money charged, and an agreed refund that the customer never received.

3.  Quality chargeback: Customers who assert that they did not get the item, they received the product late, or they got the item in faulty condition can ask for an issuance of this chargeback.

4.  Fraud chargeback: A customer can file this chargeback if there is an identity theft supposition or if someone wrongly used a customer’s credit card.  

Not all banks use these terms, but they are similar to the codes given. The most common chargeback people file is fraud chargeback. Since most credit card companies favor their customers, you have to know the various reason codes to protect your business.

You need to keep documents and evidence

One of the most effective ways to avoid chargebacks is proper documentation of credit card transactions. If you do not have any concrete proof of these, a customer can indisputably demand a chargeback to get their money back. Otherwise, if you have documents, customers cannot do this so easily.

After a customer successfully passed the initial procedure of a chargeback, an investigation will take place. When you have the needed documentation on hand, there is a big chance that you can reverse the claim.

For online stores, it is more complicated to avoid chargebacks since swiping the actual credit card is not possible. If you have an online store, what you can do is to print the transaction information and ask for the customer’s signature for validation. This is why identifying a customer is a must. You can ask for any valid ID such as driver’s license. If this is a phone order, double check the credit card number on your business’ records.

Final Thoughts

By following the tips given above, chargebacks are far less likely to happen to your business. Although not all chargebacks are lies, you need to be vigilant since many take advantage of this process to commit crimes.

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Waqar Hassan is a Blogger, Author and Entrepreneur who heads an IT & Web Company. He loves writing and manages several blogs including,,, and Waqar Hassan is one of the top Freelancing Coach and does coaching in Tbilisi, Georgia and on the internet. He can be contacted at and followed @HassanGill on Twitter.

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