Chargebacks for Credit Card Deposits

Can Cardholders File Chargebacks for Credit Card Deposits?

The card networks have created elaborate chargeback regulations, specifically designed to protect the rights of all parties involved in processing credit card transactions. Unfortunately, those regulations often create more questions and uncertainty than they do clarity!

For example, if a credit card is used for a deposit, can the transaction be charged back? Are chargebacks for credit card deposits a possibility for merchants?

A Brief Overview of Chargeback Limitations

Before getting too far into the specifics of a deposit chargeback, merchants must understand the limitations of the chargeback process.

Even though networks set out with the best intentions, merchant rights often get compromised when a consumer disputes a transaction.

Of course, it is possible for a merchant to engage in fraud, intentionally trying to prohibit consumers’ access to products, services or funds they rightfully deserve. Merchant errors might also occur, which would validate a consumer’s transaction dispute.

However, cardholder abuse of the chargeback process is far more likely. Friendly fraud is a dangerous consumer behavior that provides bank-issued refunds that aren’t warranted.

A friendly fraudster might file a deposit chargeback for the wrong reasons:

  • Consumers experience buyer’s remorse and don’t want to fulfil their commitments.
  • Filing a deposit chargeback with the bank seems like an easier option than dealing with the merchant.

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When Cardholders Dispute Deposits

So, can cardholders file chargebacks for “non-refundable” credit card deposits? Yes, they can. As with any chargeback, providing there is a valid claim to a refund, the cardholder has the right to dispute a transaction.

Valid claims to a chargeback include the following circumstances:

  • The cardholder never signed or authorized a non-refundable deposit.
  • The merchant is unable or refuses to provide products or services related to this deposit.
  • Services or products provided, related to the deposit charged, totaled a transaction value less than the deposit amount.
  • The cardholder was promised a refund for this initial deposit, but it was not processed.
  • The deposit was not credited toward the final purchase of the goods or services, for which this deposit pertained.

Deposit Chargeback Representment

If the merchant committed an error and the cardholder deserves a refund for the deposit, the chargeback must simply be accepted.

However, if the cardholder is engaging in friendly fraud, the merchant should dispute the chargeback through representment.

To dispute the chargeback, the merchant will need documentation to validate the deposit charge or the denied refund.

The evidence needed to fight the chargeback will depend on the reason code used. Visa and MasterCard outline the representment documentation requirements for each reason code in their online guides.

Chargebacks911™ specializes in helping merchants successfully dispute all chargebacks, including deposit chargebacks. If you’d like to learn more about the products and services we offer, contact us today!

Preventing Chargebacks for Credit Card Deposits

By eliminating merchant error and deterring friendly fraud, merchants can reduce their risk of deposit chargebacks.

  • Clearly outline deposit refund policies. Let customers know any stipulations that will prevent a refund and when earned refunds will be issued. Have cardholders read and approve these policies before charging the deposit to the card.
  • Clearly outline what services will be provided.
  • Use accurate, detailed and easy-to-understand product descriptions.
  • Promptly refund deposits. Communicate refund timelines, especially delays, to cardholders.

Protecting Revenue

Chargebacks can result from various consumer-merchant interactions, including credit card deposits. Minimizing risk is a detailed, complex task. Merchants who choose to manage chargebacks in-house often struggle to retain sufficient amounts of revenue.

Chargebacks911™ offers various chargeback management products, all of which can help reduce the risk of chargebacks resulting from deposits.

  • Merchant Compliance Review: A 106-point inspection of a business’s policies and procedures is accompanied by an actionable plan to eliminate chargeback triggers.
  • Intelligent Source Detection™: Are your deposit chargebacks resulting from merchant error, criminal fraud, or friendly fraud? Intelligent Source Detection™, a combination of proprietary technologies and human forensics, can tell you the real reason behind the reason code.
  • Chargeback Alerts: Merchants who join chargeback alert networks receive notifications from banks when consumers report unauthorized transactions. Merchants have the chance to refund the customer before a chargeback is finalized.

Would you like to learn more about preventing deposit chargebacks or the products we offer? Contact Chargebacks911™ today!


Prevent Chargebacks.

Fight Fraud.

Recover Revenue.

Nov 9, 2015   790      Regulations & Guidelines  
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