What is a Dispute?

A dispute arises when a customer believes that a transaction should not have occurred or that the product or service received did not meet their expectations. Common reasons for disputes include:

Unauthorized Transactions: The customer did not authorize the charge.

Product Not Received: The customer paid for an item never delivered.

Defective or Not as Described: The product received was damaged or did not match the description provided at the time of purchase.

Billing Errors: The customer was charged the wrong amount or multiple times for the same transaction.

When a dispute is raised, the merchant may have the opportunity to resolve the issue directly with the customer before it escalates to a chargeback.

What is a Chargeback?

A chargeback is a consumer protection mechanism that allows customers to reverse a transaction through their bank or credit card issuer. This process is typically initiated when a dispute cannot be resolved directly with the merchant. The chargeback process involves several steps:

Initiation: The customer contacts their bank or credit card issuer to report the dispute and request a chargeback.

Investigation: The bank reviews the claim, which may involve gathering evidence from both the customer and the merchant.

Decision: The bank determines whether to approve or deny the chargeback request.

Reversal: If approved, the transaction amount is refunded to the customer, and the merchant's account is debited.

Chargebacks can have significant implications for merchants, including potential fees, loss of revenue, and damage to their reputation. Frequent chargebacks can also lead to higher processing fees or even the termination of the merchant's account with their payment processor.

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Want to learn more about how Chargebacks work? Checkout our easy to follow Chargebacks Guide for Merchants.

When a bank or card brand receives a chargeback dispute from one of their cardholders, they open an investigation by contacting the processor (Stax) and requesting evidence that the product/service was provided.

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Stax will then notify the merchant of the chargeback and advise as to what documentation should be provided.

While rare for most merchants, chargebacks can be costly and time-consuming. Dishonest cardholders can try to take advantage of the system, and the burden is on the merchant to prove that they fulfilled their commitment to the cardholder. It is recommended that you respond to all chargeback notices as quickly as possible and resolve any disputes with your customers before they result in a chargeback.

What are common chargeback reasons

• Fraudulent transaction
• Duplicated charges
• Not as described/defective merchandise
• Services not provided or merchandise not received
• Refund not processed after the returned item

How can I avoid chargebacks

• Always insert the EMV chip, swipe the magnetic strip, or imprint any card that is present. (Inserting the chip greatly reduces your liability and should always be your first choice.)
• Use PIN to verify debit transactions.
• Ensure that all displayed pricing is clear and up to date.
• When appropriate, collect the billing address, zip code, and CVV.
• Use additional ID verification, such as a driver’s license.
• An agreement or authorization form provides you with additional documentation for large purchases and can also detail the product or service should a dispute arise later. Have the customer sign the form.
• Maintain a history of tracking and proof of delivery.