A chargeback is a customer disputed sale that has passed through your merchant account. A card holder has disputed the charge placed by your company through your merchant account on their credit card.
 
A chargeback occurs when a credit card processing company charges the merchant (you) for the cost of returned items or incorrect orders that the customer claims were made to his or her credit card. Chargebacks can also be initiated by banks, often without consulting their customers. These chargebacks are usually for processing or authorization-related issues.
 
This means that when there is a dispute over a charge (such as fraudulent use of a credit card by the buyer or a cardholder's winning of a dispute over whether the charge was authorized), the online merchant must pay back the amount of the original charge, plus any penalties, to the cardholder's bank.
 
 Here are some common causes of chargebacks, all of which you need to be concerned about as an e-commerce merchant, along with possible preventive measures:
 
Chargebacks can occur because of several reasons. But in all the cases there are solutions and measures that would help you in reducing their effect.
 
Firstly, the customer might claim not to have received the requested goods or services or claims to have been charged improperly for goods and services they have not yet received. In this case you must make all the terms and conditions clear to your customers like the shipping and handling charges, etc. Also you can obtain the cardholder's signed proof of delivery for every transaction through the credit cards in which the merchandise is not delivered at the point of sale.
 
Second, the customer claims that a credit for a refund was not processed. To counter this problem you must process refunds to customer's account as soon as possible. Never refund by cash or check. Your return policy should be made clear to your customers on all the receipts and other related documentation.
 
Third, Duplicate Transaction processing might result in a chargeback. You can deal with this problem by dealing with only one transaction at a time. Be sure to make a separate invoice for every transaction that is made by a particular customer for the same dollar amount.
 
Fourth, a customer might dispute the quality of merchandise or says that it is defective. For this make your customers aware of your return policy by displaying it prominently on receipts. Take care that the merchandise is as per the needs of the customers and pay special attention to the packing and shipping.
 
 Finally, fraud mail-order, telephone-order or Internet transactions might land you in to a Chargeback. To deal with Fraud use the address verification service to verify the cardholder's address at the time of transaction. Take your customer's Telephone numbers during a transaction and call to verify the order and number given to you. Utilize CVC2 (MasterCard) and CVV2 (Visa). These two numbers are the three unique digits on the back of a MasterCard or Visa credit card. These are used in situations where the card is not present.
 
 Make sure that you don't seek authorization on a declined transaction and do not process the sale.