Chargebacks and Disputes
A chargeback is a forced reversal of a card transaction by a customer's bank. When a customer disputes a charge with their bank instead of contacting you directly, the bank investigates and may reverse the transaction—pulling funds back from your account.
Chargeback vs. Refund vs. Dispute
These terms are related but distinct:
Refund: A voluntary repayment you initiate directly to the customer.
Dispute: The customer's formal complaint to their bank about a charge.
Chargeback: The bank's forced reversal of the transaction after reviewing the dispute.
Customers can dispute charges for 45–180 days depending on the card network and reason code.
The Chargeback Process
Customer disputes the charge. The cardholder contacts their bank to challenge a transaction.
Bank reviews the claim. The issuing bank evaluates whether the dispute has merit.
Temporary credit issued. The cardholder receives a provisional credit while the dispute is investigated.
Funds reversed. The transaction amount is withdrawn from your account.
Representment. You can accept the chargeback or submit evidence to challenge it through representment.
Final decision. The bank rules in favor of either party.
Common Chargeback Reasons
Fraudulent transaction: The customer claims they didn't authorize the purchase.
Product or service not received: The customer paid but never got what they ordered.
Significantly not as described: The item arrived damaged or materially different from what was promised.
Processing error: Duplicate charge, incorrect amount, or other billing mistake.
What This Means for Your Business
When a chargeback occurs, you lose the sale amount. You may also incur a chargeback fee, regardless of the outcome. Multiple chargebacks can damage your standing with payment processors.
The best approach is prevention—clear invoices, recognizable billing descriptors, and responsive customer communication stop most disputes before they start.
Need to Respond to a Dispute?
Follow the steps in Manage chargebacks and disputes to submit evidence and protect your business.