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Chargebacks Are a Significant Part of ACH Processing Services

Any good business should focus on achieving more sales and expanding—not defending completed sales. Chargebacks can result in loss of time, money and reputation, and avoiding these charges has become a key component of credit card fraud protection.

A chargeback is the charge an ACH merchant pays to a customer after the customer successfully disputes an item on their bank account statement. At times, the reasoning may be shaky at best, but the responsibility still resides with the seller to ensure that the customer is satisfied.

"Chargebacks are the thing we at CheckGateway.com pay the most attention to with respect to our merchants," said CheckGateway.com chief technical officer Brian Bonfiglio. "Chargebacks are the best indicator that there is something wrong with a merchant and/or fraud is being committed against a merchant or a consumer, or by a merchant or a consumer."

Reasons for pursuing feedback fall into five different categories, according to Sitepoint.com:

  • Point-of-sale processing errors
  • Customer dispute
  • Post-transaction
  • Potential fraud
  • Authorization-related

The chargeback process can be a complicated and frustrating one. First, the customer contacts their bank to initiate a refund for a purchase made on their account that they dispute. The bank then researches the validity of the dispute and provides a provisional credit to the customer. Next, the bank initiates the process by obtaining credit from the merchant account through the merchant's processing bank. The merchant's processing bank then performs their own research and validation. The merchant's bank either declines the chargeback and returns it to the customer's bank, or removes the chargeback amount from the merchant account and provides written notification to the merchant. If a processing error occurred, the sale is re-presented to the bank for corrections.

Finally, the merchant provides documentation to resolve the chargeback. If the documentation is satisfactory, the chargeback is declined and the customer is charged again for the sale. If the documentation is unsatisfactory, the chargeback is successful, ending the process.

Maintaining a respectable chargeback rate is a necessary aspect of ACH fraud protection practices. "Currently, we are required by NACHA to keep our overall chargeback rate to under 2 percent—thus, each of our merchants are held to [that] threshold as well," Bonfiglio said. "If ever chargebacks become too abundant for either us or our merchants, our banking relationships would be jeopardized."

CheckGateway.com aims to limit chargebacks in conjunction with other ACH processing services. We pride ourselves on our price, funding, reliability and credibility, and our goal is to become the premier automated clearing house processor. Look around our site for further information or call us at 1-480-785-2262 to find out more about our offerings.

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