What is a Chargeback?
- Miles Graves
A Chargeback refers to the actual process of the cardholder attempting to retrieve their funds from the disputed transaction.
A Chargeback refers to a customer disputing a charge with their credit card issuer or bank. Chargebacks can happen for various reasons, such as unauthorized transactions, items or services not received, or general dissatisfaction with that product or service. In a chargeback, the cardholder contacts their financial institution to initiate the process of reversing the transaction. The funds from the transaction are taken from the Merchant’s account and returned to the cardholder.
Chargeback Cycles
From the merchant's perspective there are just three stages:
Chargeback Cycle | Description |
|---|---|
Retrieval | The initial request from the Issuer to the Merchant for transaction information. |
Chargeback | The process of each individual Dispute action from First Chargeback to Arbitration. |
Resolution | The final decision made by the Issuer for the Merchant or Cardholder to receive full, partial or no credit. |
When you’re ready to respond to a Chargeback Cycle and/or Dispute Stage, visit the pages below:
Chargeback Time Limitations
Both chargebacks that have been manually requested by cardholders to their issuers and chargebacks automatically issued when preset risk, fraud, or other security parameters, configured by banks or issuers, have been met:
Chargeback Type | Time Limitations |
|---|---|
Manual Cardholder-Initated | Open for up to 270 days from the original date of the transaction.
|
Automated Issuer-Initiated | Open with an unlimited timetable. |
Chargeback vs Dispute
A Dispute and a Chargeback are two distinct processes related to payment disputes.
A Chargeback occurs when a cardholder bypasses the Merchant entirely to dispute the transaction with their issuer or credit card company to reverse a transaction. Chargebacks are typically more formal and can also incur additional fees from a Merchant perspective. Chargebacks are typically initiated due to claims of fraud, or failure to receive goods or services.
A Dispute occurs when a customer is questioning a transaction with their issuing bank or credit card company, typically due to concerns raised around unauthorized charges, billing errors, or overall dissatisfaction with a product or service. This can be a formal process initiated through their issuer or credit card company during the preliminary Chargeback proceeding or an informal process where concerns are raised by the cardholder directly and discussed with the Merchant to seek a resolution.
Both listed processes above require prompt response from the Merchant with compelling evidence provided to support their transaction’s validity.
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