A chargeback happens when a cardholder disputes a transaction with their bank and the bank reverses it, taking the money back from the merchant. Reasons include fraud, goods not received, a faulty product or a charge the customer does not recognise.
The merchant is notified and given a limited time to respond with evidence such as a signed receipt, delivery confirmation, order records or correspondence. The card scheme and the issuing bank then decide who is right, and fees often apply whichever way it goes.
Chargebacks are most common in online and phone orders, where the card is not physically present. Retailers reduce them with clear product descriptions, recognisable statement descriptors, prompt refunds and good records.
A high chargeback rate can lead a payment provider to increase fees or restrict an account, so it pays to monitor them and fix the cause. Keep order, delivery and communication records so a dispute can be answered quickly.