What Are Chargebacks And Why Are They Used?

Chargebacks are handy mechanisms that can be used to help users recover funds online — typically from fraudulent or misrepresented transactions. It’s important to understand that they differ from a traditional refund because they are a manual reversal of the payment, rather than a reimbursement.

In both real-world retail and online spaces, chargebacks are quite common. However, they’re more often associated with ecommerce and online gaming.

In this article, we’ll take a closer look at these chargebacks and why users decide to explore this avenue to recover their lost funds.

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What Is A Chargeback?

In simple terms, a chargeback is the reversal of a credit or debit card transaction that is initiated by the cardholder’s bank, usually due to the cardholder wanting to recover funds that have been taken by an unauthorized or misleading vendor.

The main purpose of this mechanism is to protect consumers from abuse. This is outlined in Regulation Z, which outlines the Truth in Lending Act (TILA) for consumers in the United States.

The process can be expanded to include a variety of stakeholders at different ends of the spectrum.

Typically, the cardholder, the vendor or merchant, the issuing bank and the vendor or merchant’s bank are involved in the process, but in situations where fraud is alleged, it’s not uncommon for the police or financial crime experts to become involved during the latter stages.

Common Reasons For Chargebacks

Customers often have very specific reasons for filing chargeback claims, but here are some of the most common examples we’ve seen:

Unauthorized or fraudulent transactions.
Customers not receiving the goods or services they initially paid for.
Goods not being what they were described as or being defective beyond use.
Transactions being processed twice, or an error relating to unauthorized billing.
A glitch during the checkout process resulting in an order not being submitted correctly.

It’s important to remember that there is a clear distinction between legitimate disputes and fraudulent claims that are made with self-serving intentions. These fraudulent claims typically involve customers trying to get products for free by misusing the chargeback system, despite there not being an actual issue.

The Chargeback Process: Step-By-Step

Here’s a simple overview of what the chargeback process typically involves:

A customer raises a dispute through their bank and states that they want to make a chargeback claim.
The bank will then review the claim and may possibly credit the customer should they decide that the claim has merit.
The vendor or merchant is then notified of the claim being submitted against them and will have the opportunity to provide evidence.
The issuing bank of the vendor or merchant will then decide whether the claim should be accepted.
The outcome will depend on how strong the cases presented by both parties are and whether a fair transaction was made.

Most banking providers require that any chargeback claims be made within 60 or 120 days of the disputed transaction, although exceptions can be made in special circumstances, depending on the evidence presented.

Using Chargebacks In The Real World

There are many ways that chargebacks can be used in the real world, although they’re particularly common with those using online casinos as they’re purely digital, are usually classified as being high-risk by banking providers and operate using a fast-paced business model that prioritizes quick deposits and payouts.

If a player believes that a past transaction wasn’t authorized by them, they can raise a dispute with their bank. They can then show evidence to the bank that they didn’t authorize the payment, such as by proving that they don’t have an account associated with their email address.

Key to this is understanding BFCB charges on bank statements, as they can throw some players off and cause more harm than good, especially if the player is unaware that this stands for ‘Betfred Chargeback’.

Our research states that these labels likely arise from situations in which the player has successfully issued a chargeback against Betfred or Betfair in the past, only to find that this claim was later rescinded or reversed.

Chargeback Tips For Players And Operators

There are a few things customers can do to better protect themselves when making chargeback claims online.

First and foremost, they should always read the terms and conditions of any website wanting access to their financial information, even if it’s a licensed and reputable site.

We’d also recommend avoiding any sites that look sketchy or unreliable. At the same time, players should always keep a record of where and when they’ve made an online transaction, as this will help the bank pinpoint where things might have gone wrong.

For vendors and merchants, it’s also wise to reinforce the understanding of the mechanisms available to consumers as they’re at risk of falling victim to illegitimate claims.

Refund and withdrawal policies should be iron-clad and easy to find on the website, as well as directing users to contact the customer service team through the appropriate channels.

To improve things even further, it may be wise to use a fraud-detection tool as this can help businesses flag problematic users before they can cause harm.

Final Thoughts

It’s important to remember that while chargebacks are vital for protecting consumers from fraudulent behavior, they should be used responsibly and only for legitimate reasons.

Misusing these tools can hurt honest businesses and result in future claims from genuine victims not being taken seriously, which can be devastating to those who have fallen foul of scammers or misleading vendors.

Consumers are becoming more aware of these tools and what labels such as BFCB stand for, although there’s much more that each of us can do to ensure that we remain one step ahead.

Consumers should attempt to work through their dispute directly with the vendor before escalating their grievance via a chargeback, but they’ll need to be aware of the window allowing them to make these claims as they can vary from one country to the next.

Disclaimer: The above references an opinion of the author and is for information purposes only. Never gamble for more than you can afford to lose. Gambling can lead to a serious addiction. Gamble responsibly.