Definition
A chargeback is a reversal of a completed card transaction initiated by the issuing bank when a customer disputes a payment due to fraud, service issues, or incorrect billing.
How this works
The customer raises a dispute with the issuing bank. The bank reviews the claim and sends a chargeback request to the acquirer. The merchant submits evidence. Based on validation, the transaction is either reversed or upheld.
Benefits
• Protects customers from fraudulent or unauthorized charges
• Ensures fair dispute resolution
• Builds trust in digital transactions
• Encourages merchants to maintain transaction transparency
FAQs
Why do chargebacks occur?
Chargebacks occur due to fraud, duplicate charges, incorrect billing, item not received cases, or service related disputes.
Who bears the loss in a chargeback?
If the dispute is valid, the merchant bears the financial loss along with penalties or fees.
Can merchants challenge a chargeback?
Yes. Merchants can submit supporting documents such as invoices, delivery proof, and transaction logs.
How can businesses reduce chargebacks?
By improving transaction validation, customer communication, fraud control, and refund workflows.