Internet fraud comes in many shapes and sizes. It could be an email phishing scheme or an overseas prince in distress. It could be an innocent mistake or a cleverly orchestrated scam.
You might be the victim or you might be the scammer.
The Greatest Source of Internet Fraud
While merchants stand to make a killing with their online sales, the real beneficiary is the customer. Because online transactions are classified as card-not-present, cardholders are awarded a powerful form of consumer protectionâ€”the chargeback.
As a cardholder, you have the right to carefully guard your money. If problems should arise, you have an outâ€”a way to dispute unauthorized or unsatisfactory purchases.
It's true the chargeback is a much needed form of protection. Online fraud often skyrockets to more than $100 billion each year. You have a very real risk of becoming a victim. However, not all that fraud is actually unauthorized transactions.
A significant portion of the yearly online fraud is a result of friendly fraudâ€”also known as chargeback fraud. Friendly fraud happens when cardholders become dishonest about their purchases. They claim the item was never delivered (when it was) or crow about poor quality products. This type of internet fraud accounts for $40 billion of the $100 billion in fraud each year.
Contributing to Friendly Fraud Losses
Have you ever filed a chargeback? What was the reason? Were you genuinely wronged? Or was the process the easiest out?
Some consumers file chargebacks because the product they received was of a substandard quality. It wasn't what you expected or was inexpensively made compared to the money you forked out.
Other consumers mistakenly file a chargeback because the product they ordered wasn't delivered. In actuality, it was just delivered late. But when the product finally arrived, the customer didn't cancel the chargeback.
If you have ever done any of these things, your actions technically qualify as internet fraud.
Understanding the Ramifications of Your Actions
Each year, 50% of all online companies go out of business because of chargebacks and the fees associated with them.
Every time you file a chargeback, you raise the risk of your favorite merchant calling it quits. You probably didn't know your actions could have such a dire consequence. You probably figured it didn't matter if you filed a chargeback or went through the return process.
Therefore, it is important for consumers to understand the ramifications of the chargeback. First, the merchant loses out on the profits they could have made because you failed to return the purchased item. Second, the merchant loses the money paid to initiate the transaction. Lastly, the merchant will be charged a chargeback fee for each transaction.
What You Should Do Instead
If you receive a product that was of poor quality, return the item rather than file a chargeback. We all know the return process can be time consuming and obnoxious, but it really is the ethical thing to do.
Not only is a return more honest than a case of chargeback fraud, it is usually more financially rewarding. A chargeback can take up to six months to process. That is a long time to wait for your money. A return, on the other hand, can get you your money right away.
If you need help initiating a return because the merchant is being uncooperative or is difficult to contact, consider working with a consumer protection agency. Often times, these mediators can help you get your money backâ€”you'll exert very little effort and the merchant can avoid a chargeback.
You've probably never thought of yourself as a criminal. And you probably aren'tâ€”not really. But you really do need to be aware of internet fraud and your contribution to profit losses.
Juli works for Chargebacks 911 and the sister company eConsumerServicesâ€”educating both the merchant and consumer about internet fraud.