Visa Chargebacks and Your Business

As a merchant, your customers are your top priority. This means you work hard to answer their questions, provide them with products and services that they want, and support their buying and shopping demands. This drive to meet the needs of consumers has contributed to the booming card-not-present (CNP), Internet, and mobile browsing and shopping infrastructure. With this shift in how people shop, we’ve also seen a rise in use of credit cards to pay for purchases. Of course, this has translated into an increase in credit card chargebacks.

We get a lot of questions about credit card chargebacks and the differences between the various major credit card companies. To help you and other merchants, we’re going to look at Visa chargebacks and provide you with some key information you need to be aware of whenever handling this type of chargeback.

Understanding Visa Chargebacks Terminology

Like any other industry, the banking and credit card industry comes with its own long list of terms and acronyms. Make sure you clearly understand this key Visa and industry-wide terminology:

• Acquirer (acquiring bank): A client that signs a merchant or disburses currency to a cardholder in a cash disbursement, and directly or indirectly enters the resulting transaction receipt into interchange.
• Authorization: A process where an issuer, a VisaNet processor, or Visa Stand-In Processing (STIP) approves a transaction. This includes offline authorization.
• Cardholder: An individual who is issued and authorized to use a card or virtual account.
• Card issuer: A financial institution that issues Visa cards.
• Chargeback: A transaction that an issuer returns to an acquirer.
• Issuer (issuing bank): A client that enters a contractual relationship with a cardholder for the issuance of one or more payment card products.
• Merchant: Any person, firm, or corporation that has contracted with an acquirer to accept Visa as payment for sale of goods or services.

This is just a snapshot of some of the key terminology you need to understand. We recommend you read the entire glossary of terms in the Chargeback Management Guidelines for Visa Merchants guide. (Note: the definitions above are verbatim from the afore mentioned guide.)

Working with Visa to Manage Chargebacks

The Visa chargeback life cycle and dispute resolution process can be broken down into a few simple and clear steps. As always, we recommend that you are completely familiar with Visa recommendations, rules and the processes concerning chargeback disputes.

1. Your customer (cardholder) files a dispute over a transaction.
2. The bank (card issuer) can ask the customer for a written explanation of the problem. The transaction (sale) is then returned to the acquirer using VisaNet.
3. The acquirer can now decide whether to resolve this problem or forward the dispute onto you, the merchant.
4. Assuming you do receive notification of the chargeback, you can decide to accept the claim or dispute the chargeback.
5. Your acquirer reviews the information you’ve submitted. If you’ve decided to fight the chargeback and your acquirer agrees with you, the chargeback is then represented using VisaNet to the issuing bank.
6. Now, the issuing bank can decide how to proceed with the chargeback claim.
7. The outcome is determined based on your decision whether or not to dispute the chargeback claim.

The key thing to note is that throughout the Visa chargeback process, the company is involved and communicating with you throughout the process.

Visa Guidelines and Rules

To minimize cardholder problems and questions, Visa has very clear rules and guidelines concerning how merchants should provide key information to their customers. One area in which the company is very specific is that of your return, refund, and cancellation policies. As we’ve written before, and as Visa reiterates in the Chargeback Management Guidelines for Visa Merchants guide, it’s very important that this information is clearly and easily available to your customers, and doing so can help prevent the occurrence of disputes and chargebacks.

It’s in your best interest that you enforce the following Visa guidelines:

• Card-present transactions and merchants: Your refund/cancellation/return policy must be clearly printed on the front of the purchase receipt near the signature space or in another obvious area. When the policy is on the back of the receipt or on an attached document, there must be room for the cardholder’s signature or initials. (Read Disclosure for Card-Present Merchants in Chargeback Management Guidelines for Visa Merchants for more information about disclosure statements.)
• Card-not-present transactions and merchants: For phone transactions, your refund/cancellation/return policy must be mailed, emailed, or texted to the customer and cardholder. The onus is on you to prove that the cardholder did receive this information—which is why detailed record-keeping is so important. For Internet and mobile sales, your policy must be clearly communicated in one of two locations: during the checkout process, the customer must accept or acknowledge the policy; or on the checkout screen next to the submit button. The key here is that the cardholder is clearly presented with your refund/cancellation/return policy. (Read more about this in Disclosure for Card-Absent Merchants in Chargeback Management Guidelines for Visa Merchants)

Learning More About Visa Chargebacks

There is much more that you need to know and understand about Visa chargebacks and working with this company. For example, ensure that you are familiar with the Visa reason codes, copy request requirements, advice from Visa on minimizing chargebacks, and how best to provide compelling evidence.

Knowing and understanding this information will go a long way in supporting your relationship with Visa, and ultimately your customers. These recommendations and guidelines from Visa are in place to make it easier for everyone involved to work together and continue to run a successful business.