Chargeback
A chargeback is a forced reversal of a card payment initiated by the cardholder’s bank, usually because the customer disputes the transaction. The money is taken back from the merchant while the dispute is investigated.
The cardholder contacts their bank rather than the merchant. The bank raises the dispute, and the funds are debited from the merchant’s balance immediately, before anyone has decided who is right.
The merchant can defend it by supplying evidence — a receipt, delivery confirmation, correspondence, the terms the customer agreed to. The card scheme rules set the deadlines, and they are short.
Card schemes also charge a fee for handling the dispute, which in most cases the merchant pays whether or not they win.
Why it matters to you
Chargebacks are the one payments cost that is largely within your control. Clear descriptors on the customer’s statement, a visible refund policy and answering the phone prevent most of them.
Work out what you’re actually paying.
Whatever your statement calls it, the only figure that matters is total cost divided by total takings. Our calculator works that out from your own numbers.
Open the calculator