What is a chargeback?

A chargeback is the reversal of a card payment started by the cardholder through their issuing bank. The issuer takes the funds back from the merchant via the acquirer, and the merchant can contest with evidence.

Common reasons

• Fraud, when the cardholder did not authorize the payment.
• Non-delivery of goods or services.
• Processing errors, such as a duplicate charge or a wrong amount.
• Goods not as described.

How the process runs

The cardholder disputes the payment with the issuer. The issuer raises a chargeback under the card scheme's rules, with a reason code, and the acquirer debits the merchant. The merchant can then submit evidence, such as proof of delivery or authentication data, within a deadline. If the evidence holds, the funds can be returned. Each step follows scheme rules and timelines.

Chargebacks come with a fee, and they count in the merchant's dispute ratio, which Visa and Mastercard monitor. A high ratio can lead to monitoring programs, penalties and, in serious cases, the loss of card acceptance.

What it means for payment operators

Your merchants need to prevent disputes where possible and answer the rest with evidence. Pre-chargeback alerts let them refund before a chargeback is filed, and reconciliation keeps chargeback debits visible next to the payments they relate to.