A reversal of a card payment initiated by the cardholder's bank, usually after the customer disputes a charge.
Chargebacks are a consumer protection built into card networks. A cardholder can dispute a transaction for reasons such as fraud, goods not received, items not as described, or being charged twice. The issuing bank reverses the payment and the merchant can respond with evidence, such as delivery confirmation or signed agreements. The card network's rules determine the outcome.
For example, if a customer claims a pair of shoes never arrived, an online store can submit tracking information showing delivery. Merchants usually pay a fee for each chargeback, and high chargeback rates can lead to penalties or loss of card processing. Friendly fraud, when a customer disputes a legitimate purchase, is a common problem. Clear billing descriptors, good customer service, and fraud screening help reduce chargebacks.
A service that securely captures and transmits payment details from a customer to the banks and networks that approve the transaction.
Payment ProcessorA company that handles the technical and financial steps of card and digital payments between a merchant, card networks, and banks.
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