It is a nightmare for every credit card owner to discover that they haven’t made a particular payment on their credit card statement. The question here is whether it is either credit card misuse or an oversight by the financial institution. To protect the credit card holder, financial institutions have introduced the so-called “chargeback” procedure. The chargeback term means “compensation”.
The term “chargeback” refers to credit cards. It is a procedure by which a credit card holder can cancel bookings. The withdrawn amount is then credited back to his account. However, not at the expense of the credit cardholder.
Suppose the cardholder thinks that an amount has been in appropriately debited from his credit card account. In that case, he can object to the debit within a certain period and get his money back, whereby the merchant pays the fees incurred in the chargeback. The chargeback procedure thus serves to protect the credit card holder against misuse.
The procedure is quick and smooth because the reversal of the booking is done within a few days, and the amount in question is credited back to the account.
The credit institution then contacts the recipient of the payment. It checks whether the payment was legitimate or not. However, these investigations in the chargeback procedure take considerable effort and cost more, which is borne by the payee. Depending on the individual circumstances, they can range between 20.00 to 60.00 euros.
However, it must be warned against abusing the chargeback procedure or even using it as a means of exerting pressure on the contractual partner. After all, if a legal transaction has been established, then any disputes between the buyer and seller must be clarified through legal procedure. If the chargeback procedure is used unlawfully, the buyer must bear the costs of the chargeback in case the seller objects. In the worst case, the credit company may terminate the credit card holder.
The advantages for the credit card holder are obvious: it is an elegant and, above all, a fast way of recovering the money promptly in the event of an unlawful charge.
For the merchant, especially in the online business, some disadvantages can arise. There are always customers who abuse chargeback. Not only is the debit amount cancelled, but the merchant also has to pay the fees, which he often passes on to the customers by adding the chargeback costs to the price of the goods or services.
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