If you get a chargeback, DO NOT ISSUE A REFUND!!!

I have to clear up some misunderstanding about what to do when you receive a chargeback.

So, you open your mailbox one day and see a letter from your merchant service provider. You open it and realize that it is a chargeback letter for a transaction that took place a few months ago, and upon examining the letter you notice the chargeback reason code is: 85. After looking up what this chargeback reason code means, you realize that it is because you forgot to issue the refund that you had promised the customer.

You log into your virtual terminal to find the transaction, and go to issue a refund. You might as well correct the situation now, since your customer is expecting their refund right? —- Wrong!

Once you receive a chargeback, you do not want to issue a refund to that customer. No matter if the situation was as described above, or if your customer is standing at your counter. When you get a chargeback, the money from that transaction is immediately withdrawn from your account. If you go and issue a refund now, you just paid your customer back twice. I know that refunding your customer is the best customer service that you can do, but if the chargeback wheels are already in motion, you need to go ahead and let the chargeback work itself out.

If you do issue a refund, and the customer was already reimbursed from the transaction, you need to contact your processor immediately and explain to them that you issued a refund. Since it takes several days for a refund to be completed, there is a chance that you can get your money back if you act quickly, but time is working against you. Once the refund hits your customer’s bank account it can be considerably more difficult, and many times impossible to get the extra refund back.

Once a chargeback is initiated, check to make sure that you had not issued a refund at an earlier time, and then follow the instructions on the chargeback letter. If you had already issued a refund on this transaction, let your processor know. I have seen Amex allow chargebacks on transactions that have already been refunded, and I’m sure that it has happened with other card issuers as well.