First, let's get an understanding of what a chargeback is and some typical reasons why one might occur.
What is a Chargeback?
Chargeback (aka dispute) is a return of funds to the customer (similar to a refund). A chargeback is initiated by the issuing bank (cardholder's bank) once the customer informs it of an issue with a transaction.
Typical chargeback reasons:
- did not authorize the transaction- fraud
- does not recognize the transaction
- did not receive the purchased product/service
- received an incorrect product or an unsatisfactory service
- did not get a promised refund
- was charged multiple times for the transaction
Sometimes chargebacks are also initiated by the issuing bank itself for technical reasons, like:
- expired card authorization
- non-sufficient funds
- bank processing error
Common Chargeback Questions:
How much will a chargeback cost me?
As soon as CAKE receives the chargeback for your restaurant, it will automatically debit your bank account for the chargeback amount + a non-refundable chargeback fee of $20.00. In case you choose to represent the chargeback and win the case, the chargeback amount will be returned back to your bank account.
How much time do I have to respond to it?
Please check the email that you have received in regards to the particular chargeback in question. It will let you know how many days you have to respond to the chargeback. Please note that a response submitted on a later date will not be submitted on your behalf. If the operator responds after the reply by date the chargeback will be counted as an automatically lost one and the debit for the chargeback will remain permanent.
Shall I be responding to every single chargeback I receive?
If you receive a chargeback letter, CAKE recommends that the operator replies to as many chargebacks possible. If you identify that the chargeback received is valid, meaning that the cardholder has a legitimate reason to charge back, then go ahead and accept the chargeback as the means to refund the customer.
What happens if I don’t respond?
If the operator does not respond within the required timeframe (stated in the email), the operator will automatically lose the chargeback. The debit for the chargeback will be permanent.
What kind of information shall I provide to fight a chargeback?
Please refer to the email received as in regards to the type of information you need to provide to fight the received chargebacks. Usually it will include a copy of a signed receipt and any comments that will explain what happened during the transaction.
When will I know if I won the chargeback or lost it?
CAKE will notify you via email if the chargebacks received were lost of won. Please track the chargeback emails for more resolution information.
What can I do on my end to prevent chargebacks?
As an operator it is your responsibility to collect all payment information from your customers. The best ways to prevent chargebacks from being initiated are:
- Always verify the customer’s ID/Driver’s license matches the card before accepting the payment.
- Always verify the order with your customer before placing it.
- Always receive a signature when accepting a credit card (digital is preferred using the customer touch display)
It is important to remember that even though you may practice the above principles, chargebacks will still occur occasionally. All employees you hire should be aware of these basic principles to make your best effort in preventing chargebacks.
What is the acceptable chargeback rate?
If the operator goes over a chargeback rate of 0.75% (total # of chargebacks by count / total # of transactions by count), the operator will be considered a high risk type of a merchant. In that case, the operator will need to review his/her chargebacks and make adjustments to fix the issues that case the chargebacks. If the operator goes up to 1%, the operator might get turned off by CAKE for having an excessive number of chargebacks.
What is my chargeback rate?
To calculate your chargeback rate, please take the total number of chargebacks received and divide it by the total successful transactions done within a period of a month. Each card brand is calculated separately. If you will get to over 0.75%, you will be notified by CAKE.
Shall I refund the charged back transaction?
Please do not refund the charged back transaction for any reason. Refunding it will not take away the responsibility of the chargeback. The refund might also put you in a situation where the customer might be double refunded (via refund and via chargeback). If you think that the cardholder needs to be refunded, just go ahead and accept the chargeback.