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While chargebacks and refunds are unpleasant enough on their own, merchants can find themselves faced with a significantly worse problem: the chargeback-refund double dip. These are transactions in which a chargeback and a refund are both processed for a single payment, essentially costing the merchant twice—or more than twice, when chargeback fees and processing costs are included.

These double refunds can come as a result of mistakes or as deliberate fraud. They can be difficult to prevent, requiring merchants to monitor a number of different aspects of the transaction process. These costly double refunds may seem unusual but they are not exactly rare. Some estimates peg them as occurring for up to 10% of chargebacks.

There are two basic structures for these double refunds: one in which the chargeback occurs first and one in which the refund occurs first.

Chargeback First Double Refund

These sorts of double refunds occur when the customer first contacts their issuing bank in order to file a chargeback, then later contacts the merchant to complain and receives a refund. The chargeback is processed later, even after the merchant has refunded the purchase, resulting in the merchant returning payment twice for a single transaction.

In an ideal situation, the issuer would discover that a refund had been processed during the merchant inquiry process, and thus not process the chargeback. However, this depends largely on the timeline of the refund/chargeback and the procedures of the particular issuer and card brand. Fortunately, proof of a refund is extremely solid evidence that can be presented during the representment process. Unfortunately, a successful chargeback representment still costs you money and increases your chargeback ratio.

The best way to handle this sort of double chargeback is to try to prevent it from happening. The point in this process where the merchants have the greatest degree of control is when the customer requests a refund. If you train your customer service agents to pay attention to particular indicators, they can often suss out whether or not a customer has already contacted their bank about filing a chargeback. If your customer service rep has reason to suspect the customer has already filed a chargeback, contact the bank. If a case number has been issued, that is a telltale sign that a chargeback is coming.

Refund First Double Refund

The inverse of the aforementioned situation, this sort of double refund occurs when the customer requests a refund from the merchant first and files for a chargeback second. These sorts of refund/chargeback combos are generally a bit easier to prevent but they still require careful management of your business.

As with the chargeback-first double refunds, an emphasis on customer service techniques can be invaluable in preventing a chargeback-refund double dip. Train your customer service representatives to communicate that the refund will be issued promptly and that the customer need not contact their bank. And then, of course, make sure that your refund system works such that this is indeed what happens. Any unnecessary delay or poorly communicated information increases the risk of a double chargeback.

As with the other form of a double refund, evidence of a refund should be nearly airtight evidence for representment. But that should still be avoided, if at all possible, due to the consequences that result even from successfully challenged chargebacks.

Chargeback Management Can Reduce Double Refunds

In addition to implementing the customer service standards described above, assembling a comprehensive chargeback management program is essential to preventing the chargeback-refund double dip. A key aspect of such a program is chargeback management software. In order to understand your chargebacks—including those that are doubled by refunds due to mistakes or fraud—you need to have a way to monitor your sources of chargebacks. Few tools are more valuable than a chargebacks analytics dashboard that integrates with a full suite of other chargeback management tools, including representment solutions.