The chargeback process: what to expect

Accepting credit cards makes life easy for your customers, and it means you get paid fast. Sometimes, however, a cardholder will dispute a charge, leading to a chargeback. This means their payment is reversed back to them by their bank and debited from your bank account.

The good news, however, is that there are simple things you can do to protect yourself against chargebacks. Learn how Wave handles chargebacks and supports you through the process.

Index

  1. Reason codes
  2. The chargeback cycle
  3. Managing customer disputes
  4. How do I respond to a chargeback?

What is a chargeback?

A chargeback is a return of funds used to make a purchase by credit card. A chargeback can occur if a customer disputes a purchase, claiming it was fraudulent or something went wrong with the service. When a customer disputes a purchase, their credit card company reverses the charge, crediting back the funds to them and debiting your business’ account.

Reason Codes

When a customer initiates a chargeback with their bank, they are required to provide a reason for the dispute. Based on the situation and information they provide their bank, the bank assigns a reason code. Each credit card company (American Express, Visa, Mastercard, and Discover) has their own codes, but they will generally fit into the following categories:

Reason Code Details
Fraud

The purchase was made without the customer’s knowledge or authorization

Quality/Satisfaction The customer never received the item they paid for, or they are not satisfied with the quality of the item/service
Processing Error The customer was billed more than once, or a refund is owed but was not isued

The chargeback cycle

Day 1: Wave sends you an email detailing the reason for the dispute and recommendations on how to respond.

Day 10: Deadline for you to respond to the chargeback.

Days 20-30: After receiving your response, Wave submits a dispute response to bank.

Days 30-90: The case is reviewed by the customer’s bank. The bank’s chargeback department has 60 days to review any evidence provided and make a decision.

Day 90: The case results are sent back to Wave. Wave will contact you with the results of the case

Managing Customer Disputes

Wave's loyalty is to you, our customer. If your customer has unfairly disputed a charge and you have decided to fight the chargeback, 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 bank.

What if I don’t want to dispute the chargeback?

When you accept a chargeback, the dispute process is over. We advise your customer's bank that you accepted the chargeback, and no further action is required.

Are there any other consequences to a chargeback?

Nobody likes customer disputes, but chargebacks can occur from time to time and will have a financial impact to your business if not addressed. 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 your business process or how you are managing fraud risk, and may result in account restrictions. Wave can help you identify opportunities to enhance your business practises to help prevent or manage disputes.

Understand how money moves

When you receive a chargeback, 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?

Wave will work with you if you receive a chargeback. Here’s how it works:

  1. Attempt to contact your customer as soon as possible. Try to resolve the issue directly with them.

    If you are successful, and your customer agrees to contact their bank to drop their dispute, their bank will send them a confirmation letter or email. In order to reverse the funds back to your bank account, Wave will require a copy of the confirmation.

    If you can't resolve the issue by speaking to your customer, proceed to Step 2.

  2. Send Wave all relevant documentation. Wave will then submit a response to the customer’s bank on your behalf.
  3. Your customer’s bank has up to 60 days to review the submitted information and make 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.

Key points and timeframes to remember:

  • You have 10 days to respond to the dispute notification.
  • The funds will be debited from your bank account while under dispute.
  • You can expect the entire process to take up to 90 days if you choose to fight the chargeback case and provide the required documentation.
  • If the bank resolves the dispute in your favour, the disputed amount, including the $15 dispute fee, will be deposited back into your bank account.
Was this article helpful?
7 out of 11 found this helpful