When processing credit cards, very often merchants become vulnerable to friendly fraud or chargeback fraud. The fees associated with chargebacks can severely affect the financial health of your business. In fact, chargebacks account for about $1 million annually.
When do chargebacks begin? They occur when a customer files a dispute with his/her bank concerning a credit/debit card transaction. The problem appears when the merchant isn’t involved in the dispute process or is notified when it’s already too late.
What Is Chargeback Protection?
Chargeback protection can be characterized as a prevention product designed to protect merchants who accept credit cards. Merchants can use chargeback prevention to be protected against fraud in a transaction where there’s an unauthorized use of the credit card. It’s also called to cover claims associated with the merchant’s liability to the service bank. Chargeback protection usually relies on the use of fraud filters.
A licensed issuer provides chargeback prevention to protect acquirers or ISOs who sell or underwrite merchant accounts in case a merchant goes out of business without enough funds in his/her merchant account to cover the remaining chargeback costs.
Chargeback protection may be used in following scenarios:
- Purchases made with a lost/stolen credit card before the card owner reports the card missing
- Charges made with a fake/counterfeit credit card and account number
- The shipping information is edited when the purchase is already completed
- In the case of signature problems, meaning the signature doesn’t match that on file or is missing
Chargeback Prevention and Chargeback Warranty
The terms “chargeback prevention” and “chargeback warranty” are often used interchangeably. However, they have to do with different services. Unlike chargeback protection, which is explained above, chargeback warranty is a type of front-end fraud protection service developed to protect merchants against unauthorized and truly fraudulent credit card transactions.
The truth is that chargeback prevention can’t serve as 100% protection against chargebacks. To protect your business against chargebacks, you should turn to reputable chargeback insurance providers that will give you direct control over resolving credit transaction disputes. With a respectable chargeback protection company, you can achieve the highest rate of chargeback resolution.
The prevention tools offered by true professionals in the field can help you effectively safeguard against large-scale fraudulent activities. Automating chargeback responses and early warning notifications of customer disputes will help you stay away from the negative impact caused by chargebacks.
Electronic payments expert, Blair Thomas, co-founded eMerchantBroker in 2010. His passions include writing/producing music, and travel. eMerchantBroker is America’s No.1 chargeback insurance provider, serving both traditional and high-risk merchants.