It’s fairly common for merchants to think the merchant account provider and the card issuer are one and the same, but they’re not. A good merchant account provider works to protect the merchant, whereas Visa and the other card issuers primarily work from the standpoint of protecting the cardholder.

If a customer calls in for a refund as a merchant you’ve got to use your discretion as to whether you wish to issue the refund or not. Even if they are just a few days past the returns window our experience is that you’re better off issuing the refund. Expect a chargeback in that scenario, in which case you’ll have to decide whether you wish to contest the chargeback or not. Some merchants contest every chargeback and other contest none. It’s really your call.

You should protect yourself as best as possible by having a clearly stated refund policy on your website. If you have too many chargebacks and cross the chargeback “threshold” with the card issuers (typically 1% of your volume) then the providers may shut you off.

A good merchant account provider has their own chargeback thresholds and will proactively work with you to address issues if they see too high of a chargeback rate occurring. They want to try and help you get your chargebacks under control.

You should never issue a refund via check if the original purchase was made via credit card. There are people out there who will use stolen credit cards to make purchases and then shortly thereafter request a refund via check. They’re simply thieves who are trying to bilk you out of money. Always issue the refund back via the credit card.

The best way to protect yourself from chargebacks is to put out quality products.

Next issue – Part 3 – Discount rates and fees

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