Accepting credit cards allows you to get paid fast, and satisfy customers who prefer to pay by card. Sometimes, however, a cardholder will dispute a charge, leading to a “chargeback”. This means their payment is taken back out of your account, which is bad!
The good news, however, is that there are simple things you can do to protect yourself against chargebacks. Read on to learn all about how chargebacks work, and how to keep your business safe.
What is a chargeback?
A payment dispute — or “chargeback” — occurs when your customer disputes a charge on their credit card with their bank. Typically, this occurs because your customer did not recognize the charge, did not authorize the charge, or feels the quality of your services or goods wasn't as advertised.
What do I need to know about chargebacks in my Wave account?
It is important to understand the role that Wave plays in processing chargebacks, as well as your role, your customer's role, and the role of your customer's bank.
- A chargeback begins with your customer communicating with their bank to dispute a charge on their credit card. The customer initiates the dispute, and the chargeback is processed by your customer's bank.
- Your customer's bank makes the ultimate decision about how to resolve the dispute. In other words, Wave can neither prevent a chargeback from taking place, nor deny it.
- Card network rules usually provide customers with up to 120 days to dispute payments with their bank, although sometimes it can be longer.
- When your customer disputes a payment with their bank, the transaction is automatically refunded. Your customer's bank withdraws the funds from Wave's account and returns them to your customer. Two to four business days later, Wave automatically withdraws the chargeback amount from your bank account, together with a $15 dispute fee.
- Wave will notify you of the dispute by email, and you will have 15 days to respond. If no response is received within 15 days the chargeback will be accepted and the case will be closed. If you can provide evidence to your customer's bank that shows the charge was valid, however, then the dispute will be resolved in your favour, and the funds will be returned to you, along with the dispute fee.
Wave's loyalty is to you, our customer. If your customer has unfairly disputed your charge, we will advise you on the evidence you need to prepare, and assist you by submitting it on your behalf to your customer's bank. It is important to understand, however, that Wave is not involved in any way in deciding whether a customer dispute and chargeback is valid. This is entirely decided by your customer's / cardholder's bank.
Are there any other consequences to a chargeback?
Nobody likes customer disputes, but we understand that chargebacks can occur from time to time. Provided you are processing card payments regularly and have few chargebacks, we can continue to process payments for you. However, excessive chargebacks may indicate underlying problems with how you are delivering your service or managing fraud risk, and may result in account restrictions.
How does money move through the system?
Tracking money movement will help you understand how you get paid and why you are responsible for chargebacks.
To start, let's look at how you get paid: Your customer's bank approves or declines a payment and sends funds to Wave. Wave then transfers these funds to your bank account.
Now let's see what happens when you receive a chargeback. When a chargeback is issued, your customer's bank will automatically debit Wave. We are unable to prevent this from taking place, which is why we are obligated to collect the funds from you.
How do I respond to a chargeback?
We will work with you if you receive a chargeback. Here are the steps you will take:
- Attempt to contact your customer as soon as possible. Try to resolve the issue directly with them.
- If you can, the bank will send a reversal to Wave, who will transfer the funds to you.
- If you can't, proceed to Step 2.
- Send Wave all relevant documentation. Wave will then submit a response to the customer’s bank on your behalf.
- Up to 60 days later, Your customer’s bank reviews submitted information and makes a decision.
- If the bank rules in your favor, your customer’s bank will reimburse Wave for the chargeback. Wave will then deposit these funds, and the $15 dispute fee, in your bank account.
- If the bank rules in your customer’s favor, Wave will notify you of the bank’s decision and reasoning.
What happens when I respond to a chargeback?
The process of responding to a chargeback is dictated by the cardholder's bank. We will help you through the process.
- You have 15 days to respond to the dispute notification.
- The funds will be debited from your bank account while under dispute.
- You can expect the process to take up to 60 days after submitting documentation.
- If the bank resolves the dispute in your favor, the disputed amount, including the $15 dispute fee, will be deposited back into your bank account.
I want to respond to a chargeback. What do I do now?
Please continue to the next page for detailed instructions.
Managing Customer Disputes
Wave is here to guide you in the payment dispute process.
Receiving a chargeback can be an unpleasant experience. Wave is here to help you with this education page, or on the phone with our Payment specialists.
What are my options?
When you receive a chargeback and dispute notification, you have 2 options:
- Accept the chargeback
- When you accept a chargeback, the dispute process is over. We advise your customer's bank that you accept the chargeback, and no further action is required.
- Dispute the chargeback
- If you choose to dispute the chargeback, we notify your customer's bank that you are disputing the chargeback.
- We advise you on the information you need to provide to your customer's bank, and we communicate that information to the bank on your behalf.
- This process can take up to 60 days.
- Funds remain debited from your bank account while under dispute
If you receive a chargeback, you will receive an email notifying you and the documentation required to dispute the chargeback with your customer’s bank.
The type of documents you should submit varies depending on the reason your customer disputed the payment with their bank. This will be explained in the notification email. Below are details on the evidence required to provide you with the best chance of having the dispute ruled in your favor.
Why am I receiving a Chargeback?
What do I need to demonstrate?
How do I demonstrate this?
The Customer is saying they never received the product or service
That you did provide the product or service
Email communications, UPS tracking slips, documents confirming progress, copy of the contract
The customer is saying they cancelled recurring payments
That the transaction was within the pre-authorized time period
Email communications, recurring payment contract
The customer is saying they were charged twice for the same product or service
That each transaction was for something different
The customer is saying the product or service is not as described
That you provide the product or service that you originally said you were going to provide
Contracts, pictures, email communications, invoices
The customer is saying he does not recognize the transaction
That this is a transaction your customer made legitimately; refresh your customer's memory
Invoices, contracts, email communications
The customer is saying he did not authorize the payment or is saying the transaction is fraudulent
That you had proper authorization from the card holder. Try to connect your customer to the actual cardholder.
Contracts, email communications, credit card authorization forms
Please note the document requirements:
- Total documents cannot exceed 1 MB
- Must be in black and white
Discover, MasterCard and Visa
- Total documents cannot exceed 2 MB
How do I work with Wave to contest a chargeback?
When it comes to responding to chargebacks, it is definitely a team effort. Here are a few things to keep in mind:
- The faster you respond with all the appropriate documents, the faster we can get this resolved.
- When building a case, we are essentially telling a story. The more information you can provide about the client, the product/service, and the situation, the easier it is for us to build the case. Timelines are also very helpful.
- Make sure the documents submitted clearly demonstrate your story.
- Make sure the documents are formatted properly (See “How do I respond?” above).
Preventing Chargebacks: Good Business Practices
There are good business practices that can reduce your chances of receiving a chargeback. We would like to share them with you.
Communication is key for your business. It strengthens your relationship with your customer. If you maintain open and clear communication with your customer, they are more likely to discuss concerns with you instead of approaching their bank. You can contact them to:
- Give a status update on the project.
- Let them know of any delays.
- Make sure they are satisfied with the service or product.
Set and meet expectations
Some payment disputes are initiated by a customer simply because they are unsure about the transaction. You can help yourself and your customer by clarifying key items, including:
- What the payment schedule is.
- What the work schedule is.
- How the transaction will appear on their bank statement.
Business records will help you respond to a chargeback. When presenting a case to your customer’s bank, we try to build a clear, strong and concise story. The more valuable evidence we can add to the case, the stronger it will be.
- Did the client sign any documents? Save those documents.
- Is your client emailing you? Save those emails.
- If the service you provide is completed in stages (i.e. home improvement, website design) you can draw up a Progress Report and have your client sign it, demonstrating to the bank that you provided the service as promised.
- Make and keep files on clients that include contact information, ID verification, and evidence that ties the individual to the transaction and credit card.
Stay alert for red flags of fraud
We want to help you avoid scams. Fraud related payment disputes are the most challenging cases to win. Preventing them in the first place is important.
Protect yourself by looking for these tell-tale signs and other suspicious behavior:
- New customers who contact you by text and ask if you accept credit cards.
- Emails from less traceable domains like outlook.com, ymail.com and fastmail.com.
- Customers who want to pay more than your standard charge, asking you to send the additional amount to someone else.
- Being asked to refund a payment using another method.
- Spelling mistakes and poor grammar.
- Failed payment attempts by a customer who then asks you to process the payments for them.
Do the scenarios above sound familiar? If you have any concerns or questions about a recent payment or interaction with a customer, you can always reach our team at firstname.lastname@example.org. We can review your account and your payments with you.
We are here to help!