A chargeback occurs when a cardholder disputes a payment with their card issuer. The card issuer creates a formal dispute which immediately reverses the payment. The payment amount, along with a separate dispute fee levied by the card network, is deducted from your account balance.

There is a dispute resolution process through which you can respond and submit evidence to make your case that the payment was valid.

• If the dispute is found in your favor, the disputed amount is returned to your merchant account.
• If a dispute is upheld, the card issuer’s decision is final, and the cardholder’s payment remains refunded.

innRoad understands that managing chargebacks can be a complex and challenging aspect of running your business

The adjudication process and final decisions are made by the issuing bank/financial institution. innRoad has no say in whether a chargeback is won or lost. 

However, innRoad’s Payment Dashboard allows you to more easily respond to chargebacks and submit evidence to the issuing bank. This article is aimed at helping you better understand the chargeback process and provides industry best practices that can help you prevent chargebacks and increase the likelihood of you winning a chargeback.

How Does the Chargeback Process Work: 

Here’s a breakdown of the chargeback process.

1. Cardholder Initiates a Chargeback

The chargeback process begins when a cardholder sees a charge on their statement that they believe to be invalid, typically due to concerns about fraud, dissatisfaction with a product or service, or other issues.  The customer files a dispute against the charge with the bank or financial institution that issues the credit card used for the purchase (aka the issuing bank).

2. Issuing Bank Reviews the Chargeback

Once the chargeback is filed, the issuing bank reviews the cardholder’s claim and assigns a reason code that reflects the nature of the dispute. This code is crucial as it dictates the direction of the investigation and the type of evidence that will be required from the client.  See Reason Code section or more details on understanding different types of chargebacks  The issuing bank then investigates the claim.

• If the claim is deemed invalid, the chargeback is voided, and the process ends there. 
• If the bank determines that the claim is valid, the disputed funds are removed from your merchant account and transferred to the cardholder.
  

3. Merchant Receives and Reviews the Chargeback

Once you receive the chargeback in your innRoad Payments dashboard, you have the option to either accept it or dispute it by providing evidence that refutes the cardholder’s claim. 

• In addition to the reason code, in some cases, innRoad can obtain additional information from the issuing bank about the cardholder's claim. 
• Once you gather the information to refute the cardholder's claim innRoad facilitates the evidence submission process by helping you submit the necessary documentation to the issuing bank.

You can learn more about viewing and responding to chargebacks in the following support article: View & Respond to Chargebacks

4- Final Decision by the Issuing Bank

After you submit your evidence, the issuing bank reviews the materials and makes a final decision.

• If the evidence provided successfully counters the cardholder’s claim, the funds are returned to your account, minus the fees associated with the chargeback.
• If the evidence does not refute the claim, the chargeback is upheld, and the provisional credit to the cardholder becomes permanent.
  
  

We know that Chargebacks are unfortunate. innRoad does not have the authority to influence the issuing bank’s final decision but we are committed to providing you with the tools to respond to your chargebacks and support you during the process.

Reason Codes:

Here is a quick explanation of the different reason codes that are assigned to chargebacks.  

Chargeback Best Practices for Hoteliers  

We know that chargebacks are unfortunate and can have a big impact on your business.  While innRoad has no say in whether a chargeback is won or lost, we are listing some best practices that we have seen lead to success when dealing with the most common chargebacks in the lodging industry.  There are 3 things to focus on with all types of chargebacks.

1. Take steps to prevent the chargeback

2. Collect documentation to mitigate future chargebacks

3. Submit relevant evidence when a chargeback is filed

Common Chargebacks in the Lodging Industry 

Type 1: Fraudulent

Cardholder claims they did not authorized the transaction and that their card was used by someone else.

1. How to prevent Fraudulent Chargebacks:

• Statement Descriptor

  • Your statement descriptor is configured when you first signed up for innRoad Payment and determines how a charge will be displayed on the guest's card statement
  • Sometimes, a guest may dispute a charge as fraud because they don't recognize the charge description on their statement.
  • This most often occurs for business that are incorporated under one name but operate as another name.  For example, if a business is incorporated as XYZ Hotel Management, but operates as Oceans Retreat, you want to make sure that the statement descriptor is configured as Oceans Retreat.
  • Please contact innRoad support if you think you may need to change your statement descriptor.
    
    
• ID and Card Verification
  • Ensure that you collect a valid ID from the guest at the time of check-in. This step is crucial for verifying the identity of the person who made the reservation and will be staying at your property.
  • Ask the guest for the card that was used to book the reservation.
  • Compare the name on the ID with the name on the card used to make the reservation. This can confirm that the person checking in, is the actual cardholder.
  • If the name on the ID doesn’t match the card on file, request a new card from the guest. Alternatively, ask the guest to provide a signed authorization form from the cardholder, indicating their consent to purchase the room for the guest (i.e. A parent booked the reservation for a child).
  • Make sure the photo on the ID matches the person presenting it. This is a simple but effective way to prevent fraud.
  • If the guest can not provide a matching ID and Card, you will need to consider if you want to provide access to the property.
  • Verify that the address on the ID matches the address information associated with the credit card. Consistency here reduces the risk of fraudulent transactions.
    
    
• EMV Terminal
  • Run the card through an EMV terminal
  • An EMV terminal provides the most secure card transactions
  • Even if you have the card details on file, use an EMV terminal to capture the reservation balance. EMV terminals offer greater security by authenticating the card with a chip, reducing the risk of chargebacks.
  • Please contact innRoad if you'd like to learn more about the innRoad Payments integrated EMV solution.

2. Collecting Evidence to mitigate future chargebacks:

• Store a copy of the valid photo ID used to verify the guest at check in.
• Ensure that you collect a signed registration form from each guest at check-in. This form should include the guest's acknowledgment of the reservation details, terms, and conditions of their stay.
• If the guest is not the same person as the cardholder (i.e. A parent booked the reservation for a child), obtain a signed statement from the cardholder authorizing the transaction.  This document serves as proof that the cardholder has consented to the payment and is aware of the transaction.
• Save all email communications with the guest related to the reservation, including confirmations, special requests, or modifications. These records provide a clear timeline and context for the transaction.

3. Evidence submission

When dealing with fraudulent chargebacks, presenting your evidence correctly is crucial to challenging the dispute successfully. Including the following evidence may strengthen your case:

• Screenshot of the innRoad Reservation History tab showing the date and time the reservation was booked and from where the reservation was booked (i.e. Booking Engine, Expedia, etc.)
• A valid photo ID of the guest
• Signed Guest Registration form
• Copy of confirmation email sent to the guest's email

 Type 2: Credit Not Processed

These disputes usually arise when a guest believes they should not be held responsible for a specific charge.  In the Lodging industry this is reason code most commonly associated with chargebacks related to cancellation and no show fees. Note:  Sometimes Cancellation or No Show fee disputes may get classified as Fraudulent

1. How to prevent chargebacks

• Ensure that your cancellation and no-show policies are clearly displayed to the guest on all channels (booking engine, Expedia, etc)
• Send a confirmation email to the guest immediately after booking, including a clear restatement of your cancellation and no-show policies. This email should outline the terms in detail and include any associated fees or deadlines.

2. Collecting and Submitting Evidence for Chargeback Disputes 

• Include a screenshot of the innRoad Reservation History tab showing the date and time the reservation was booked and the platform it was booked through (e.g., Booking Engine, Expedia).
  
• Include screenshot that shows the policies are clearly displayed on the channel that the reservation was booked (booking engine, Expedia, etc)
• Provide a copy of the confirmation email sent to the guest, showing the date and time it was sent, the email address it was sent to, and the body of the email, which clearly outlines the policies.
• If applicable, provide evidence that the guest did not show up, such as check-in records or logs. This can include check-in logs, system records indicating the absence of the guest, or other documentation showing the guest did not use the reserved room.
• Provide logs or records of any communications with the guest regarding their reservation, cancellations, or no-shows.

Type 3: Product Not Acceptable

This type of chargeback occurs when a cardholder disputes a transaction, arguing that the product or service provided was either not as described, defective, or unsatisfactory, prompting them to seek a refund through their bank.

1. How to prevent chargebacks

• Ensure that all product or service descriptions on your website, booking platform, and other channels are accurate, detailed, and clearly communicate what the guest should expect. Include features, benefits, and any limitations.
• Use high-quality images or videos to provide a clear representation of the product or service, helping manage guest expectations.
• Clearly outline any terms and conditions related to the product or service, including any limitations or disclaimers. Make sure this information is easily accessible and reviewed by the guest before purchase.
• Include a summary of the product or service description in the booking confirmation email to reinforce what was agreed upon.

2. Collecting and Submitting Evidence for Chargeback Disputes and Mitigation

• Include a screenshot of the innRoad Reservation History tab showing the date and time the reservation was booked and the platform it was booked through (e.g., Booking Engine, Expedia).
• Archive records of product or service descriptions, including website content and booking engine details, as they appeared at the time of booking.
• Collect and save copies of images, videos, or other media used to represent the product or service.
• Provide a copy of the booking confirmation email sent to the guest, including details of the product or service and any terms and conditions.
• Document the terms and conditions provided to the guest at the time of booking, including any disclaimers or limitations related to the product or service.
• Include evidence that the guest was informed of and acknowledged any changes to the booking or service.
• Include a screenshot or copy of the customer’s acknowledgment of your return policy at the time of purchase.