A chargeback is a transaction reversal that occurs when a customer disputes a charge on their credit card statement that they believe to be fraudulent or unauthorized, and receive a refund.
How a Chargeback Works
Chargebacks are initiated by the issuing bank, and are typically processed by the payment processor. When a customer disputes a charge, the issuing bank initiates a chargeback and requests a refund from the payment processor. The payment processor then contacts the merchant and requests evidence that the transaction was legitimate and authorized.
If the merchant is unable to provide such evidence, the chargeback is upheld and the funds are refunded to the customer. The merchant is typically charged a chargeback fee for each chargeback that is upheld.
Benefits of Chargebacks
Chargebacks offer several benefits to businesses and consumers, including increased security and peace of mind, and reduced risk of financial loss.
