12.5: Incorrect Amount

Amount-related chargebacks are actually some of the easiest disputes to stay away from. That’s why they sting even more when they show up. Most of these problems stem from human mistakes – like when a staffer accidentally keys in the wrong number during a busy rush. Hidden fees and unexpected charges also trigger disputes that soon turn into chargebacks.

That’s a chargeback about to happen. This happens to hotels when they add resort fees without telling their guests first. Nobody likes when mystery charges appear on their statement weeks later.

How It Works

A customer who reviews their monthly bank statement and discovers a charge that doesn’t match what they remember paying will contact their bank instantly. Once that call happens the bank will start what’s known as a chargeback process – they’ll reverse that payment and return the money to the customer while they investigate what went wrong.

Your payment processor will notify you about it through a chargeback notification. It will show dispute reason code 12.5 along with the transaction information. Next comes a request from the bank for evidence that proves you charged the customer the correct amount.

Most merchants find the situation gets a bit tough at this point. Merchants usually have somewhere between 10 to 14 days to pull together and submit their evidence which might include original receipts, itemized invoices or screenshots from your payment processing system. Banks need to see strong proof that matches the amount the customer agreed to pay.

Merchants are caught off guard because customers have 120 days after their original transaction to file disputes like these. That’s a full four months where any charge might come back and create problems for your business – and the long window means you need to keep records for every transaction you manage.

Modern payment systems have become much better at preventing these disputes from happening in the first place. Most checkout terminals will show the total amount on the screen before customers tap, insert or swipe to approve their payment. Mistakes still happen though. Manual entry is where the errors pop up more usually than not and tip calculations can sometimes go wrong. Every once in a while a decimal point lands in the wrong place and the customer ends up being charged ten times what they expected to pay!

How it Affects Chargeback Prevention

Customers who open their credit card statement and see a charge amount that doesn’t match what they remember agreeing on are probably going to file a chargeback dispute against your business. These disputes can damage your business beyond losing that one transaction.

Your chargeback ratio gets worse every time one of these disputes comes through and the card networks are always keeping a close eye on these numbers. These incorrect-amount disputes add up and make your business look careless and unprofessional. Card networks expect that you should have been able to catch these pricing errors before they ever made it onto a customer’s statement. Once your chargeback ratio gets too high, you’re looking at account restrictions that can limit how you process payments or even full account termination.

Dispute costs can add up faster too. Each dispute costs you the original transaction amount and on top of that you’ll get hit with chargeback fees that are anywhere from twenty to a hundred dollars per dispute. Your team ends up wasting hours that you could spend elsewhere grabbing transaction records and putting together evidence packages for each dispute. And if your account does get restricted, you won’t be able to process customer payments normally. That brings your cash flow to a halt.

Prevention actually starts right at your checkout process. You want your prices shown plainly at every step with the final total displayed before customers submit their payment information and you should double-check that your authorization amounts match the same numbers that customers see on their screens. Your staff needs training on double-checking every manual entry that they make because just one wrong keystroke can trigger a dispute a few weeks down the road. Consider changing your point-of-sale system so it asks for extra confirmation for any amounts that are over a set threshold. These basic verification steps will catch most pricing errors before they turn into expensive chargebacks.

Your payment processing system needs scheduled attention as well. Keep your software updated so it works with items like tips and service charges correctly and test your entire checkout flow at least once a month so you can catch any display problems that might confuse your customers.

Example Scenarios

Restaurant servers who accidentally enter $150 instead of $15 for a lunch order usually aren’t at fault. These mistakes happen pretty frequently during busy Friday night rushes when orders pile up faster than they expected and the point-of-sale system starts to lag behind. Servers try to move as fast as they can through the orders and they hit an extra zero by accident and suddenly the customer sees a charge that’s ten times higher than what they expected on their credit card statement.

Hotels actually do the same with their resort fees and it drives customers crazy. A traveler books what looks like a fantastic deal on a hotel room for $200 per night. Fast forward to checkout and suddenly there’s this extra $45 resort fee added to the bill out of nowhere. Hotels technically list the fee somewhere in the small print on the booking page. Guests miss it while they’re busy trying to book their room. Travelers walk away and feel like they’ve been deliberately misled and to be fair that reaction makes total sense. Timing plays a big part in how this unfolds – when hotels hold back these extra costs until the very end they gamble between a successful sale and an extremely angry customer who’s ready to challenge the charges.

Retail stores run into their own version of incorrect billing amounts – this happens when customers from Canada order from U.S. websites. Prices appear in U.S. dollars throughout the entire checkout process which seems easy enough. Then the final charge hits their credit card in Canadian dollars without any warning. Customers expect to pay around $100 USD but instead see $135 CAD show up on their statement and instantly start to figure out what went wrong.

These situations share one common thread. Merchants had a perfect opportunity to make the total amount easy to see before processing the card charge. A quick double-check of the entries before hitting the submit button literally takes about three seconds. Showing fees right up front from the beginning might mean losing a few sales. It prevents the large majority of disputes and issues down the road.

Requirements and Timeframes

A12.5 chargeback gives customers 120 days from the original transaction date to file their dispute. That’s four full months where you need to keep every receipt and email confirmation and bit of paperwork on hand. Once that chargeback lands in your account, most processors will only give you between 10 and 14 days to put together your response.

Your payment processor is going to send you a message that includes the exact deadline for your response and you should check that message instantly because some processors have even stricter timeframes than others. Holiday periods can make these deadlines even harder to meet and they like to catch merchants off guard. Miss that deadline window and you lose the dispute instantly – there aren’t any exceptions to this and it can be pretty frustrating when you’re not prepared for it.

Laws about paperwork might look tough from the outside. They’re not all that hard once you get the hang of what you’re actually looking for. That signed receipt with the exact dollar amount your customer agreed to pay is always going to be your most important piece – without that, you’re out of luck. Your email confirmations for online sales work just the same as any handwritten signature would in the physical world. Any extra fees that you brought up during your sales conversation need to be written down separately so you can prove you disclosed them up front.

International transactions add another layer of difficulty to the whole process.Different countries have their own laws about what actually counts as valid proof of the sale. A signature that’s definitely acceptable for a domestic US transaction might not hold any weight if the dispute comes from a European bank. Your payment processor should give you advice on any extra paperwork laws based on where your customer’s bank is located.

Your strongest defense against chargebacks starts long before any dispute gets filed. Receipts need to show the total transaction amount without any confusion. Always get either a physical signature or an electronic confirmation for each buy. All fees need to be shown up front during the transaction.