What Is a Chargeback?
When passengers dispute a charge, how it’s resolved, driver impacts
Intro
A chargeback is a reversal of a credit card transaction, initiated by the cardholder’s bank. It allows consumers to dispute a charge and potentially recover funds if they believe a transaction was unauthorised or incorrect.
Main Definition
In a business context, a chargeback happens when a customer contacts their bank to dispute a transaction, and the bank reverses the payment made to the merchant. While this protects customers from fraud and billing errors, chargebacks can be disruptive for businesses. Merchants often incur fees, lose revenue, and must submit evidence to defend against claims. Unlike a refund, which is initiated by the business, a chargeback is enforced by the bank or card network.
Examples
A customer sees an unfamiliar charge and disputes it. The bank processes a chargeback while investigating the claim.
A dissatisfied client skips contacting the business and instead files a chargeback directly through their bank.
Types of chargebacks include fraud-based (unauthorised card use) and service-based (goods not received or poor service).
Key Relationships
Cash Flow: Chargebacks can reduce revenue and delay incoming payments.
Expenses: Businesses may pay administrative or penalty fees for each chargeback received.
Refunds: While both reverse a transaction, chargebacks are bank-initiated and often less favourable to merchants.
Compliance: Businesses must retain accurate records to challenge chargebacks and adhere to card network rules.
Frequently Asked Questions
How can I prevent chargebacks?
Maintain clear customer communication, deliver what you promise, and use fraud detection tools to catch suspicious transactions early.What should I do if I receive a chargeback?
Gather transaction records, proof of delivery, and customer communication. Submit all evidence promptly via your payment provider’s chargeback system.Are chargebacks the same as refunds?
No. Refunds are voluntary and processed by the merchant. Chargebacks are forced reversals handled by the bank after a customer complaint.
