You've received a notification that a customer has disputed a payment. Here's what that means and what happens next.
What is a chargeback?
A chargeback occurs when a customer disputes their payment directly with their bank.
Chargebacks are possible with all card payments, whether they're processed through Tab or another payment provider, and they are a consumer right. They're more common in the tourism and hospitality industry than in other sectors.
Why do customers issue chargebacks?
Customers can issue a chargeback for many reasons, but the most common are:
the customer thinks their card was used without their permission, or
the customer thinks they didn't receive the services that they paid for
The customer must submit their version of events and supporting evidence to issue a chargeback. If the bank believes its case to be compelling, the chargeback is issued.
What to expect during this process
The customer's bank notifies us of the chargeback, and we then have a set amount of time (depending on the bank and card type) to respond and submit evidence to the bank. Sometimes this is only a few days, so we may need your evidence quite quickly.
At Tab, we can help you submit evidence for chargebacks against payments at your business, but we don't provide insurance or cover for chargebacks.
When a chargeback is issued, the funds are returned to the customer's bank first. The funds are then held until the full chargeback and appeal process is complete. Only once the review has been completed do the funds get returned to the customer, or to you.
The disputed amount is deducted from your available balance. If you win the chargeback, we will credit the payment back to your balance.
Unfortunately, the customer's bank usually doesn't give us specific details of why a payment has been charged back.
1. We notify you
We'll email both you and the customer to try to understand what happened so that we can advise you on what evidence you should submit. We'll always send the customer their Tab receipt and, if they paid using the "Accept Card" feature, the selfie they took.
When we contact you, you'll be given a deadline to submit evidence. We need to have received all of your evidence by this date; otherwise, the chargeback will be automatically accepted, and the funds returned to the customer.
2. You'll decide if you want to accept or dispute the chargeback
Disputing a chargeback means we'll provide evidence to the customer's bank on your behalf to attempt to recover the payment. You can find more detailed guidance about what to upload here.
Accepting a chargeback means you consent to returning the funds to the customer. This might be the case for a customer you overcharged, or accidentally charged twice. Once a chargeback has been accepted, it's not possible to submit evidence.
3. We submit to the bank
We will collate the evidence that you have provided and submit it to the bank on your behalf.
After we've submitted the evidence, we wait for the bank's decision. This can take quite some time - usually 2-3 months, though sometimes longer.
Aside from helping you with the evidence, Tab cannot influence the outcome of the chargeback. Because the issuing bank makes the final decision, there is no way to guarantee the outcome, even if you provide strong evidence.
What actions might we take after you receive a chargeback?
When you receive a chargeback, the customer's bank charges a fee to dispute or accept a chargeback. This fee varies depending on the customer's bank and card type, but it tends to be USD 20-50.
Tab covers this fee as a gesture of goodwill in most cases, but we do need to receive responses to chargeback notices in order to offer this. If you don't respond to the chargeback notice, this fee will be deducted from your next payout.
We expect your chargeback rate to be under 0.017% - that's less than two chargebacks in every 1000 successful payments. Most businesses will never receive a chargeback.
If your chargeback rate is higher than 1%, we will place restrictions on your account and may have to close it.
Payment best practices to prevent chargebacks
Here are some ways to protect your business from fraud and disputes:
Check the customer's ID upon arrival, and make sure the name on the ID matches the cardholder's name on the card — this is your strongest evidence in a fraud dispute.
Ensure you can contact the customer and cardholder directly (e.g. email, phone number).
Contact Tab if you have concerns about a customer's behaviour. This can include:
If the customer asks to be refunded to a different card or bank account
If the customer asks for an unusual payment arrangement - for example, asking you to make a payment to another business for them, or asking for someone else to make the payment for them
If the customer attempts to pay with multiple credit cards
Keep detailed copies of receipts, booking documents and proof of service.
Communicate clearly at point of sale — making sure the customer knows exactly what they're being charged and why, ideally confirmed in writing (e.g. a booking confirmation email).
Provide an easy way for customers to contact you for any product or service-related issues.
Proactively cancel and refund charges that are likely to be disputed, such as charges where the customer has already raised a complaint.