Chargeback

How a chargeback works

When a customer disputes a card payment with their bank (the card issuer), the issuer can reverse the transaction. The money is taken back from the merchant's account, and the merchant's processor usually charges a chargeback fee on top.

1. The cardholder contacts their bank and disputes the charge.
2. The issuer assigns a reason code, such as fraud, item not received, or not as described.
3. The funds are withdrawn from the merchant, and the merchant is notified.
4. The merchant can accept the chargeback or respond with evidence. This is called representment.
5. The issuer reviews the evidence and decides who keeps the money.

Got a dispute notice? Look up what your code means and what evidence helps with the chargeback reason code lookup.

Why chargebacks matter

Each chargeback costs the sale, the product or service already delivered, and a fee. Card networks also track how many chargebacks a merchant receives compared with its sales (the chargeback ratio). Merchants with a high ratio can face extra fees, reserves, or account closure.

How to reduce chargebacks

• Use a billing descriptor customers recognize.
• Make refunds easy, so customers come to you before their bank.
• Keep proof of delivery and clear records of every order.
• Screen for fraud at checkout.

For more, see the high-risk approval checklist and our guide to high-risk vs. low-risk merchant accounts.