Chargeback Laws in Texas
With a good chunk of purchases now happening online, businesses must be able to process credit card payments. But with that convenience also comes the risk for chargebacks, especially since online transactions are vulnerable to friendly fraud, scams, and other reasons for high chargeback rates.
If you’re running a business in the Lone Star State, you need to learn about chargeback laws in Texas if you want to avoid getting high chargeback rates that could put your revenues—and business—at risk for losses.
What Is a Chargeback?
You get a chargeback when your customer requests that the bank return the money they used to purchase your product for some reason. One of the most common causes for a chargeback is when a customer is unable to settle the issue with the merchant.
Instead, the customer goes straight to their bank to file a chargeback and that could hurt your business pretty bad, especially if you’re already tagged as high risk.
Unlike a refund, a chargeback does more damage because aside from being forced to return the customer’s money, you’re also required to pay a chargeback fee that could range between $20 and $100.
While you can get away with one or two chargebacks, a high chargeback rate can actually put your business at risk for getting charged higher transaction costs or too many chargebacks can get you blacklisted by your merchant provider.
Banks in Texas have different rules when it comes to filing chargebacks. In general, a customer is given between 60 and 120 days from the date of purchase to file a chargeback against a merchant.
But how long does a merchant have to dispute the chargeback? After accepting this complaint, the merchant is then given 45 days to respond or come up with a dispute to that claim.
Customer Chargeback Life Cycle
In Texas, a typical customer chargeback life cycle begins when a customer submits a complaint to the bank, after which the bank informs you as the merchant, giving you enough time to file a dispute. The bank then verifies if the complaint is valid or not.
If it’s not, then the bank terminates the complaint. But if it finds merit for the complaint, the bank demands that the customer be refunded their money through an official chargeback process.
As the merchant, your bank is given the chance to do its own investigation on this matter. If it finds the chargeback valid, the money is removed immediately from your bank account with an additional fee and transferred to the customer’s bank account.
But in the rare case that the merchant bank deems the claim invalid, it informs the customer’s bank of the findings and drops the chargeback complaint.
A chargeback can definitely cause a lot of hassle and headache to you as a merchant. So if you don’t want to go through the painstaking process of putting together a dispute, it’s helpful to understand the chargeback laws in Texas and know a few chargeback prevention tips.