A chargeback is a refund for the payment amount initiated by a card issuer when a customer disputes a credit or debit card transaction. Simply put, it is a reversal of payment if a customer challenges a transaction.
Globally, chargebacks are becoming more common, with 238 million cases reported last year.
Here are some common reasons for chargebacks:
- Items not received – Customers are charged for items they never received
- Overcharged – Customers were billed more for the items they purchased
- Fraud – Customers find unauthorized usage of their card
- Product or service issues – Problems with the product, delivery, or service
- Merchant errors – Errors or technical issues from the merchant’s end
Chargebacks can be initiated by the merchant or the cardholder’s issuing bank.
Upon receiving a chargeback request, the customer’s bank investigates the issue by reviewing the transactions and decides whether to reverse the payment based on the evidence.
The merchant is also notified of the chargeback, and if the evidence supports the claim, the funds are refunded to the customer.