A chargeback happens when a credit/debit card issuer charges a payment back to a merchant following a disputed transaction with the legitimate cardholder.
A chargeback happens when a credit/debit card issuer charges a payment back to a merchant following a disputed transaction with the legitimate cardholder.
The chargeback process typically begins when a cardholder notices a transaction on their statement that they don’t recognize. If they don’t reach out to the business, the customer will contact their credit card issuer and dispute the charge. The credit card issuer will then assign a code to the dispute and initiate an investigation to confirm that the request is valid.
The credit card issuer will contact the business’s merchant account provider. If the business believes the chargeback request is illegitimate, they must submit documents to prove it. This is referred to as a chargeback dispute.
If the issuer determines the cardholder has a legitimate claim — if the card was stolen, for example, or the product was never delivered — the issuer will refund the cardholder’s payment. The business is debited the payment, usually with an additional fee. That is the chargeback.
Chargebacks can take anywhere from six weeks to six months for processing, so they can happen long after a business has shipped a product. In those cases, the business loses the value of the product, plus shipping and handling. On top of that, card issuers charge fees for chargebacks, which can range from $50 to $100 or more per transaction.
If a business has too many chargebacks, they may be subject to even higher fees or be unable to accept credit card payments altogether.
Related Sources
The Ultimate Guide to Debit Card Chargebacks
What Is a Chargeback? Everything Merchants Need to Know