Chargeback Insurance

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Chargeback Insurance

Chargeback insurance

What is Chargeback insurance?

Chargeback insurance is an insurance product that protects a merchant who accepts credit cards. The insurance protects the merchant against fraud in a transaction where the use of the credit card was unauthorized, and covers claims arising out of the merchant's liability to the service bank.

How can a merchant protect them self from a charge back?

This list of eight ways to reduce the risk of chargebacks can help guide the process.

  1. Follow processor protocol
  2. Use a clear payment descriptor
  3. Get it in writing
  4. Deal with customer service issues promptly
  5. Learn to spot warning signs of fraud
  6. Train employees
  7. Keep good records
  8. Fight back when it makes sense.

What is a chargeback fee?

One of the most common reasons for a chargeback is a fraudulent transaction. In this case, a credit card is used without the consent or proper authorization of the card holder. In some cases, a merchant is responsible for charges fraudulently imposed on a customer.

What is chargeback protection?

As you know, customers or cardholders obtain credit cards from banks, which are referred to as the "issuing bank." A chargeback (also known as a reversal) is a form of customer protection provided by the issuing banks, which allows cardholders to file a complaint regarding fraudulent transactions on their statement.

Chargeback Insurance vs. Chargeback Warranty

The terms chargeback insurance and chargeback warranty are often used interchangeably, when in actuality they represent very different services.

Chargeback Insurance Chargeback Warranty
A type of insurance policy provided by a licensed issuer aimed at protecting acquirers or ISOs who sell or underwrite merchant accounts in the event that a merchant goes out of business without enough funds in their merchant account to cover their remaining chargeback costs. A type of front-end fraud protection service aimed at protecting merchants against unauthorized and truly fraudulent credit card transactions.

As you can see, chargeback insurance and chargeback warranties are two completely different solutions for very different entities. Chargeback insurance is for acquirers and ISOs, while chargeback warranties are meant for merchants.