The Difference between a Chargeback and a Refund

Sometimes, a customer decides they want their money back. It might be because the product they purchased was faulty, or they might be experiencing buyers’ remorse. Maybe they ordered a delivery and it hasn’t arrived yet, or they can’t remember making the purchase. They might have reviewed their card statement and seen items or names that don’t look familiar. This happens when there’s a discrepancy in the billing details.

For example, with many payment processors, (but not with charge.com) their name can appear on your customers’ billing statement instead of yours. And when your customer doesn’t recognize the name of this strange company, they may just call their bank and cancel the transaction. Or their purchase may have gotten lost in the mail or they may just be unsatisfied.

Faster and friendlier

From the customer’s perspective, there’s not a whole lot of difference between talking to the credit card company and talking to you, as long as they get their money back. They might even prefer dealing with the credit card company, especially if they don’t know who you are or suspect you of fraudulently charging them. Also, businesses rarely ever want to give refunds, so customers may assume they’ll get a harder time from you than from the credit card company.

But as a business, there’s a world of difference between chargebacks and refunds.  When your business account gets a chargeback, it costs extra. The customer gets their money back from you and your business also gets charged a chargeback fee. That chargeback goes into your records, and if you accumulate enough of them, your account could be audited or even suspended.

Permanent records

Also, if the chargeback is a mistake, you’ll get back the customer’s money, but it won’t be deleted from your bank records, so it can still count as a mark against you. On the customer’s side, asking you for a refund is actually faster than initiating a chargeback. The process of reversing a card payment can take months or more, while a seller-initiated refund can be instant.

It’s really up to the customer though, so make it easier for them to come to you than the bank. On your web store, display a comprehensive refund policy. Include multiple communication channels (customer care phone numbers, emails, social media, chat bots, tech support etc.) and respond promptly to complaints. Issue receipts with clear purchase details including names, due dates, tracking numbers, and contact persons in case of queries.  Always consider whether giving a refund might be financially preferable to winning a chargeback dispute–in addition to helping to keep a customer satisfied.

For more information on the difference between chargebacks and refunds, or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.