Charge-backs (returning a payment)

When a customer demands a refund from their credit card company

Banks protect themselves against charge-backs by retaining customer payments for around a month before crediting your account Internet transactions can be prone to fraud. You may need to lodge a bond to cover yourself against fraud. We will help you implement good terms and conditions on your website that will help protect you.

A charge-back , or cancellation of purchase, is when a customer demands a refund from their credit card company. The rights of the consumer are quite powerful in this area as card providers like Visa and Mastercard have set an international standard period for charge-backs that currently stands at six months. As will all sales outlets, your business model must be planned to accommodate refunds.

Banks protect themselves against charge-backs and the Merchant Service agreement you have with your bank allows them to transfer liability for payments of charge-backs to you. As an additional security measure, the bank may retain the payment from the customer for a period of time (e.g. 30 days) before crediting your account with the funds.

Money on deposit

Many Merchant Services also need you to lodge a bond to cover any charges incurred through fraud and charge-backs. This sum will vary depending upon your average transaction value and monthly turnover as well as less tangible features like the time it takes your business to fulfil orders and consequently the exposure to risk of charge-back or fraud. (More detail on exposure to risk in the next section). You can estimate the size of bond by discussing this with your acquiring bank. When you come to use the free online payments comparison tool, you will find that you can adjust the size of the bond on the "Acquiring costs" page. The tool will then assume that you have to pay interest on this sum in its calculations. This will give you a true cost comparison between the PSP solutions that use merchant services and the other types of solutions that do not need acquiring services.

As Internet transactions fall under the banner of Customer Not Present and because many Internet sales are carried out ‘cross-border’ (potentially increasing the risk of fraud) there is no way to reduce the six -month window in which a charge- back could occur.

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