In this article, we'll walk you through the entire chargeback process and provide insights on how best to navigate these challenges as a hotelier.
A chargeback is a transaction reversal initiated by a customer's bank when the cardholder disputes a charge on their card. It differs from a refund, as refunds are typically initiated by the service provider, not the bank.
For the cardholder, a chargeback is a safeguard against dishonest merchants and unauthorized charges. For businesses, it can be an unwarranted threat to revenue.
Part of what makes handling chargebacks complicated is that there are multiple parties involved. All of the following play a role:
Chargebacks are always initiated by the cardholder. They talk to their bank and provide a reason, which the bank then translates into one of their 151 predefined ‘reason codes’.
Chargebacks in the hospitality sector often reflect one of these common scenarios:
Somewhat surprisingly, over two thirds of chargebacks labeled as ‘fraudulent’ are attributed to ‘friendly fraud,’ where the cardholder simply doesn't recall the transaction and seeks clarification.
Understanding the reason code associated with a chargeback is crucial. It allows you to identify the root cause and submit a response with compelling evidence – in other words, to increase your chances of winning the case. Familiarizing yourself with chargeback codes can also aid in improving processes to prevent future occurrences.
It’s inevitable that at some point you’ll need to dispute a chargeback. If you follow the process and provide the evidence required, you have every chance of winning the claim.
It’s also important to know that the issuing bank or acquirer might charge you a dispute processing fee. If you win the case, you get that money back, but the bank keeps it if you lose.
Chargeback resolution timelines vary, but generally, a cardholder can initiate a chargeback within 120 days of the transaction. After providing evidence, it takes 60-75 days to receive a final decision, which cannot be directly contested.
While some chargebacks are unavoidable for hoteliers, proactive measures can minimize their likelihood.
Understanding the chargeback process is crucial for minimizing its impact on your hotel business. While chargebacks may still occur, implementing proactive measures and effective communication can significantly reduce their frequency.
Properties powered by Mews Hospitality Cloud typically have a much lower chargeback rate than average. In particular, hotels that use Mews Payments have little to no problems as every single transaction is processed seamlessly and securely with the guest’s consent.
Does your property have a modern payment system? Discover the benefits of a fully integrated payments solution – including reduced chargebacks and a healthier bottom line – in our guide, We Need to Talk About Payments. Download the guide