What is the difference between a chargeback and a refund?

A refund is initiated by the merchant, who returns the money voluntarily. A chargeback is initiated by the cardholder's bank, comes with a fee and a deadline, and counts in the merchant's dispute ratio monitored by Visa and Mastercard.

Refund

The merchant decides to return all or part of a payment, for example after a return or a cancellation. It is a normal business operation, usually without a penalty beyond any processing fee, and it does not count as a dispute.

Chargeback

The cardholder disputes the payment with the issuer, which reverses it under scheme rules. The merchant is debited, pays a chargeback fee, and must respond with evidence within a deadline if it wants to contest. A high share of chargebacks can bring the merchant into scheme monitoring programs.

Why it matters which one happens

The same money goes back to the cardholder in both cases, but the cost is very different. That is why it often makes sense to refund before a dispute turns into a chargeback.

What it means for payment operators

Pre-chargeback alerts from networks such as Verifi and Ethoca warn your merchants when a cardholder contests a payment, before the chargeback is filed. A refund in that window closes the case, with no chargeback fee and no impact on the ratio, and your merchants follow every alert in your branded portal.