How Well Does Square Chargeback Protection Actually Shield Merchants?

Square is popular, affordable, and convenient payment platform for buyers. At the same time, it’s also a boon for merchants. The payment platform allows even the smallest businesses to accept credit card payment with a tablet or mobile device.

That said, any merchant accepting credit cards will run the risk of customer disputes.

The Square chargeback protection program offers merchants a certain amount of shielding from the fallout of those chargebacks. Is it enough, though? Let’s take a look at the chargeback protection Square offers, and how much it truly safeguards sellers.

What is a Square Chargeback?

A chargeback occurs when a customer has an issue with a transaction and contacts their bank to ask for a forced refund. Chargebacks can happen with transactions over the Square payment network, as they would with any other processor.

When a customer disputes a transaction, the bank will look at the evidence, then forcibly withdraw the funds from your account. They will also hit you with an additional chargeback fee.

Square Chargeback Protection is good…but we can help you get fully covered.

How Does Square Handle Chargebacks?

Square’s point of sale app offers speed, mobility, and ease of use. It also provides a certain amount of chargeback protection, although it doesn’t seem to be as robust as other providers.

The chargeback protection offered by Square comes in two forms: Dispute Prevention and Liability Relief.

Dispute Prevention

The Square fraud protection approach helps prevent chargebacks. Square proactively searches for, and identifies potentially fraudulent transactions. They deploy machine learning augmented with human expertise, as well as an extensive transaction database to do this. The solution makes every effort to detect suspicious activity.

If a transaction triggers any flags, you will be notified immediately. You can then stop the sale and either conduct manual review, or simply cancel the transaction if it is a case of fraud.

Liability Relief

Prevention is always the better option. But, despite your best efforts, a few chargebacks may still get filed from time to time. In many instances, these chargebacks will be the result of friendly fraud. If that happens, Square will actively work with the bank to resolve the issue on your behalf. This can be a huge benefit, as it effectively relieves you of the burden of representment.

You get alerts about any additional information needed to fight a chargeback. This is likely to include the same sorts of evidence you would need to supply in any other representment case. Examples include receipts, copies of your return policies, proof of delivery, and a record of any communications between you and the customer.

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Square Chargeback Protection: Costs & Limitations

Square announced in 2015 that it would begin to offer a program called Square Chargeback Protection. This program provided free chargeback coverage of up to $250 per month for US- and Canada-based merchants using Square. So, even if a merchant fought and ultimately lost a dispute, the company would still cover their losses up to that $250 threshold, as long as the transaction in question was not designated as a “high-risk” transaction.

Unfortunately, the company no longer offers this coverage as of April 2019. But, even if Square Chargeback Protection was still an option, it might have had limited utility for your business.

Chargeback Protection would only really have benefitted you if your transactions mostly involved low-cost goods. Plus, product categories items labeled as “high risk,” such as electronics and collectibles, would not have qualified. These categories are common targets for fraudsters because the products are easy to move and offer high returns.

The remaining Square chargeback protection offerings are cost-effective and easy for Square merchants to use. However, you may require more support than what’s offered by these tools.

You Need to Address Chargeback Sources

Built-in protection against chargebacks may be a great asset for some merchants, but it does come with built-in deficiencies. For example, Stripe’s chargeback protection doesn't address the underlying issue that caused the chargeback. Total reliance on Square chargeback protection means you’ll continually be fighting the same types of disputes, over and over.

Reducing chargebacks over the long haul requires a proactive prevention strategy that addresses disputes at their true source. If you’re feeling overwhelmed by chargebacks, maybe it’s time to look beyond payment-platform protection.

Chargebacks911® can take card-not-present chargebacks and other dispute issues completely off your plate and up your ROI. Contact us today to learn more.