Chargeback

Veranika Minina 02 May 2024

A chargeback is a situation where a customer who made a purchase through an affiliate link requests a refund from the retailer or the payment processor, resulting in the affiliate losing the commission earned from that sale.

Chargeback Meaning

A chargeback means the refunding to the individual who made a payment, typically in the context of a credit card transaction. The chargeback effectively undoes a transfer of money from the consumer’s bank account, credit line, or credit card.

Chargebacks typically occur when customers are dissatisfied with a product or service, or when they believe that a fraudulent transaction has taken place. They have the right to dispute a charge with their credit card company or bank, which can initiate a chargeback process.

How Does Chargeback Work?

When a chargeback is initiated, the retailer or payment processor investigates the claim to determine its validity. If the customer’s claim is found to be legitimate, the retailer or payment processor refunds the customer’s money and debits the affiliate’s account for the commission earned on that sale. This means that the affiliate not only loses the commission but may also incur additional fees or penalties associated with the chargeback.

Chargebacks can pose a challenge for affiliates, as they can result in financial losses and impact their overall earnings. To minimize the risk of chargebacks, it’s essential for affiliates to promote reputable products and services, provide accurate and transparent information to customers, and ensure that the customer’s expectations are met to prevent dissatisfaction and refund requests.

Reasons for Chargebacks

Understanding the reasons for chargebacks is crucial, as it helps in implementing measures to prevent and challenge them. The chargebacks can be:

  • Bad quality of affiliate traffic: Unscrupulous individuals have various methods of exploiting affiliate marketing to exploit advertisers. Click spamming, cookie stuffing, and URL hijacking are just a few general examples. Although affiliate marketing is advantageous for both advertisers and affiliates, it is crucial to thoroughly screen and evaluate potential partnerships to prevent such fraudulent activities;

  • Billing errors: They are incorrect purchase dates or amounts, failure to provide proper credit for returns, charges for goods or services that the customer did not accept, and charges for goods that were not delivered as agreed upon;

  • Unresolved customer complaints: In cases where a customer is dissatisfied with a business’s response to their concerns regarding product quality or other issues, they may opt to dispute the charge;

  • Charging the wrong amount: This often happens when manual data entry is required to process orders, for example, taking orders over the phone. However, it can also happen as a simple error if the store is particularly busy because of numerous orders;

  • Not recognizing the transaction: In some cases, customers may unintentionally dispute a transaction due to either forgetting about making the purchase or failing to recognize the business name displayed on their statement;

  • Unauthorized transactions: Fraudulent charges may occur due to the cardholder’s physical card being lost, stolen, or their card information being obtained through other illicit means;

  • Intention to terminate a subscription: Subscriptions are viewed as a risky business practice due to the tendency for a significant number of disputed charges to arise. The reasons are forgetting about the subscription, making an error, or simply desiring to terminate the agreement. Rather than following the appropriate procedures to cancel the service, customers often perceive the chargeback process as a convenient means of resolving the situation;

  • Customer’s desire to get something without payment: Customers disregard return policies, refuse to wait for refunds, or have the intention of acquiring goods or services without paying for them. This behavior is often referred to as cyber shoplifting. Dishonest buyers have become aware that they can exploit the chargeback process by making purchases and subsequently disputing them.

These are the most common reasons for chargebacks. To sum up, you can face advertisers or customers errors as well as fraud.

Difference Between Chargeback and Refund

While the terms “chargeback” and “refund” are sometimes used interchangeably, they have distinct meanings. A refund is provided by a merchant as a reimbursement when a customer returns a product or when there is a problem with the product or service. On the other hand, a chargeback is usually implemented by the bank when the transaction goes wrong.

How Long Do You Have to Wait for a Chargeback?

The duration of waiting for a chargeback depends on how long the offer owner has to respond after a customer initiates it. This timeframe differs depending on the payment processor, typically spanning approximately from 30 to 90 days. During this period, the advertiser has the opportunity to present evidence such as signed receipts, contracts, or any other relevant documentation that demonstrates the chargeback was made in error.

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