5. What is a chargeback?
A chargeback is a transaction returned to you, the merchant, from the Issuing Bank/Cardholder when an account number does not exist or when a transaction posted to its Cardholder’s account is in question or in violation of established merchant card processing operating regulations.
To avoid retrieval requests, chargebacks and rejected items, learn a few recommended practices in our Chargeback Protection Guide.
6. What is Interchange and how does it work ?
Interchange is the banking transaction that takes place when a customer uses a credit card to make a purchase at your business. Your credit card processor and your customer's credit card-issuing bank exchange information so the transfer of funds from your customer's bank to your bank can be completed. This exchange of information is managed and maintained by the Visa® and MasterCard® associations.
Interchange can be a complex topic and it has a direct effect on your bottom line, so it's important that you understand what's happening with the latest Visa and MasterCard interchange rate changes and how they impact your business.
An interchange fee represents a portion of the overall expense your credit card processor pays for processing your Visa and MasterCard sales. This fee is in turn passed on to you as part of your discount rate. So when you make a Visa or MasterCard sale, your credit card processor pays an interchange fee on your behalf to the customer's bank to compensate them for the underwriting, funding and billing of your customer. Keep in mind, Visa and MasterCard establish the rates and standards for interchange.
Interchange categories and their related fees are determined by the nature of your business and the processing procedures you follow. Visa and MasterCard determine these rates by assessing the level of risk and expenses associated with funding and processing a transaction. For instance, the interchange fee for a face-to-face transaction is generally less than mail-order transactions because the risk of fraud is lower. The risk is lower with face-to-face transactions because you are present and can compare signatures and swipe the card. Processing procedures with a higher risk of fraud require higher interchange fees.
Twice a year, Visa and MasterCard examine changes in the card payment industry and implement whatever changes they feel are necessary. It's your credit card processor’s responsibility to communicate those changes to you before they are effective, so that you are aware of them and can make any changes that you feel are necessary for your business.