3 Reasons for Chargebacks


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The modern world, at least the modern American world, is one that deeply values convenience. No longer is hard cash the way to go. Cards and digital payments are the preferred currency of the day for many. Online retailers require some form of digital payment, whether that be debit cards, credit cards or one of the numerous third party digital wallet companies available. It is also far more convenient to manage funds online and carry lightweight pieces of plastic rather than having to remember to carry and count hard money. However, this convenience comes at a price; it carries the risk of fraudulent charges, which can result in having to file a chargeback. There is also the possibility of people filing one by mistake. In chargeback cases, there might be difficulty disputing charges depending on how good the chargeback management of the company a chargeback is being filed against is. To help you understand the cases in which a chargeback might be filed, here are the three situations that might result in one being filed.

1. Case of Merchant Error

One case in which a chargeback might be filed is something called merchant error. Merchant error is actually not a case of fraud. It is when the buyer is unsatisfied with a purchase and wants a refund. Both the merchant and the customer feel that they are in the right, though it is generally treated as a mistake on the merchant’s part. Examples of merchant error include a buyer receiving a damaged product or receiving the wrong product.

2. Case of Criminal Fraud

The second case, criminal fraud, is definitely fraud. The blame falls on neither the buyer nor the seller here. Instead, a third party has used the buyer’s card and stolen information to make unauthorized purchases. For example, a person may have stolen the buyer’s identity and used it to subscribe to a streaming network.

3. Case of Friendly Fraud

Finally, there is friendly fraud. Friendly fraud is also called chargeback fraud because it is the act of falsely filing a chargeback. In short, friendly fraud is when a customer has made and allowed a charge, has received the product or service purchased and disputes the charge. The customer is the one at fault in friendly fraud, though he or she may have committed it intentionally or accidentally. An example of intentional friendly fraud would be a buyer lying and claiming a product was defective when it was not. An example of accidental friendly fraud would be a customer forgetting about a purchase and disputing it.

Whether you are filing or disputing a chargeback, you should keep these possible scenarios in mind.

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