Saturday, March 5, 2011

Top 3 Chargeback Disputes for Banks

First of all, what is a Chargeback? A Chargeback is simply a way of disputing a transaction on your debit or credit card. Let’s go into a little more detail…

When a customer uses their debit or credit card to purchase merchandise or service from a company, for various reasons, the cardholder may feel like the charge is not warranted or invalid. For example, maybe the cardholder canceled the service and is still being charged. Maybe the cardholder is disputing the charge because they ordered merchandise or a service and hasn’t received it. Or maybe the merchandise or service that the cardholder received is not what the merchant said it would be or how they were told it would work.

Whatever the case may be, the cardholder ultimately feels like they have been wronged and they are not making any progress with resolving the issue directly with the merchant. When this happens, the cardholder often calls their bank or credit card company and disputes the charge directly with their bank by requesting to have it removed. In return the cardholders bank files what is called a Chargeback, meaning that they go directly through Visa or Mastercard to take back the money from the merchant. Visa or Mastercard notifies the merchant that “Mr. or Mrs. Cardholder” has a transaction showing up from your company, which you are not entitled to because X, Y, and Z.

In most cases the cardholder gets a temporary credit refund for the transaction while the cardholders bank battles it out with the merchant behind the scenes.

Moving forward, since this blog is not really about Chargebacks, but rather it is about the top 3 Chargeback reasons based on a 3-year evaluation, let’s get into what the top 3 Chargeback reasons are. This information is provided directly from Bank of America.

Workout Centers: Most of these disputed charges result from workout centers continuing to charge customer after they have canceled their membership. Be careful to read your workout center or gym membership contract very closely. Even if you win the Chargeback and get your money back from your bank, the merchant still has a right to sue you in court for a breach of contract. Remember that filing a claim in small claims court is not very expensive. And if you owe the merchant enough, they may just do that.

Diet Pills/Weight loss Supplements: Besides being disputed for not working, the big issue here is that many customers dispute charges because they signed up for what they thought was a free trial. Many of these company’s Auto Ship products if you do not cancel. And customers wind up being charged upwards of $50 - $100 for additional items that they did not order. In addition, many companies charge you for the trial product after the trial period. In most cases even returning an item WILL NOT get you a refund. They want your money + they have your card number = you will get charged!

Electronic Cigarettes: Besides being another “Free Trial” company to watch out for, many people simply dispute charges from these companies because the items don’t work. They are usually defective in that they don’t hold a charge or simply malfunction. They also Auto Ship products if you do not cancel and in many cases, even if you do cancel. Good luck getting any kind of refund for items that have been returned.

And there you have it, the 3 most disputed reasons for requesting a refund from a credit card company or bank. But don’t take our word for it…call your bank or credit card company, ask them about “free trials” or the other items that we mentioned here.

Just a quick side note: ironically, during this 3-tear evaluation, we couldn’t find one case where a customer was requesting a refund from a hypnosis company. Sort of makes you scratch your head and wonder…if all these other items and gimmicks work so well, why are people canceling and wanting their money back?

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