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In modern times, merchants face a new level of risk in their transactions. In order to combat this risk, credit card companies and other entities have implemented chargeback protection services.
Chargebacks are the refunded amount that consumers may receive when they file a chargeback with the credit card company after believing their account has been improperly charged. There are many types of services that can help protect merchants from these undesirable charges and refunds. Keep reading to learn more about the main types of chargeback protection services available.
What Is A Chargeback Protection Service?
A chargeback protection service is a special service designed to mitigate or prevent merchant’s unmanageable financial loss due to fraudulent charges from their bank accounts. It encompasses a wide variety of services that function to protect merchants by alerting them when a chargeback occurs. When used in conjunction with a chargeback protection service, your credit card company or bank will not be able to remove funds from your account on the consumer’s behalf.
Chargeback alerts and chargeback prevention are two primary types of services provided by third-party companies. These companies act as intermediaries between cardholders and their banks, monitoring fraudulent and unauthorized transactions on the merchants’ accounts and taking corrective action.
What Types Of Chargeback Protection Services Are There?
The types of chargeback protection services include chargeback alerts, chargeback deflection, and chargeback guarantees which are detailed below.
What Are Chargeback Alerts?
Chargeback alerts are the first line of defense against chargebacks. They do not prevent chargebacks from happening but rather alert the cardholder or their card company when there are suspicious occurrences on their accounts regarding a transaction. This is an extremely popular service for consumers and businesses because it enables them to take control of their finances; they feel empowered by knowing that they can stop fraudulent charges within a few minutes.
Chargeback alerts are delivered to cardholders directly through the credit card company’s website. When a chargeback occurs, the credit card company will retrieve up-to-date information regarding the transaction. When it detects evidence of fraud in a transaction, it activates an alert to send to the cardholder. The alert will provide details regarding the disputed charges and a request for confirmation from the cardholder.
What Is Chargeback Deflection?
Chargeback deflection is a service which detects suspicious transactions and shifts the risk associated with chargebacks to the provider of the service. It is different from chargeback alerts in that it prevents fraudulent transactions from occurring by either denying or disallowing them, rather than only alerting a customer. The consumer will not be charged while using this type of protection, however, they need to pay a subscription fee for the service.
Chargeback deflection safeguards against chargebacks by preventing the consumer from initiating one while also eliminating the need for the consumer to contact the bank or credit card company if an alert is sent. The best part of this service is how it works; this service will automatically process the disputed transaction and prevent it from being reversed.
This service works because it acts as a firewall between the consumer’s bank and any other banking institutions to which they may be connected to.
What Are Chargeback Guarantees?
Chargeback guarantees are the most common type of chargeback protection service. They work in a similar way to chargeback deflection services, but instead of preventing the cardholder from initiating a chargeback, they pay the disputed amount and transfer ownership of the funds to the cardholder’s bank.
This type of service is most commonly used by merchants who have repeatedly been charged back for fraudulent transactions on their cards or who wish to protect themselves against chargebacks that are not justified. As opposed to other types of services, they don’t require any subscription fees and are considered a good fit for the merchant who uses their credit card for eCommerce.
How To Choose The Best Chargeback Protection
Before you can pick the best chargeback protection service, there are a couple of aspects to consider. The type of fraud protection you’re looking for is paramount, so it’s important to understand what kind of fraud you will be exposed to before choosing any service.
First and foremost, you should consider whether or not the service charges any fees that can affect your bottom line. In addition, you should look into what kind of coverage they provide you and if they have multiple options available depending on your needs; some people need a certain type of coverage while others may not require a certain level of coverage at all.
The Bottom Line
It’s important to consider the type of chargeback protection you need and what you’ll be using the service for before purchasing any product or service. Understanding this will help determine the right chargeback protection service for your needs and hopefully avoid any unwanted costs in doing so.
Chargeback alerts protect against unauthorized transactions by alerting a cardholder when an unauthorized purchase is made on their account. Chargeback deflection prevents unauthorized transactions from occurring by either denying or disallowing them. Chargeback guarantees shift the risk of chargebacks to the service provider by paying off disputed amounts and transferring ownership of funds to your bank.
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