A chargeback is a forced reversal of a card transaction, initiated by the cardholder's issuing bank rather than by you. It pulls the funds back out of your account, typically because the cardholder disputed the charge with their bank instead of asking you for a refund.
How it works
A chargeback follows a defined lifecycle, and each card network sets the deadlines and reason codes:
- Dispute filed. The cardholder contacts their issuing bank to dispute a charge: fraud, "item not received," "not as described," a duplicate billing, or a refund they say never arrived.
- Provisional reversal. The issuer assigns a reason code and pulls the funds from the merchant's account, usually adding a per-chargeback fee.
- Representment. You can contest the chargeback by submitting evidence (the receipt, delivery confirmation, signed authorization, terms accepted at checkout) that the charge was valid.
- Resolution. The issuer reviews the evidence and either restores the funds to you or upholds the dispute. Some networks allow further escalation (often called arbitration) if the parties still disagree.
| Element | What it means for you |
|---|---|
| Reason code | Why the dispute was filed; it dictates the evidence you need |
| Chargeback fee | A flat fee charged per case, win or lose |
| Representment window | The limited number of days you have to respond |
| Chargeback ratio | Disputes as a share of your transactions, watched by processors |
Why it matters to you
A chargeback costs more than the sale. You can lose the goods or service already delivered, the transaction amount, and a non-refundable fee on top, even if you ultimately win the dispute. Sustained high chargeback ratios can put your merchant account under review or at risk of termination.
Most chargebacks are reducible with everyday controls: clear billing descriptors so customers recognize the charge, itemized receipts, delivery and signature records, an easy and responsive refund path, and accurate product descriptions. The goal is a clean record you can point to during representment, so the evidence speaks for itself.
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