What is a Chargeback?

A Chargeback is when a customer disputes a transaction on their credit or debit card. They request their banking institution to petition the merchant processor to return the disputed funds. Chargebacks are meant to protect consumers from unauthorized transactions and fraudulent charges.

A chargeback may occur on both debit and credit card transactions. Chargebacks can be granted to a cardholder for any number of reasons. Here are a few common reasons:

• The customer was charged for items they never received.
• There was a duplicate charge made by mistake.
• A technical issue occurred that caused a mistaken charge.
• The cardholder’s card information was compromised and a fraudulent charge was made.

Why Am I Being Charged a “Chargeback Fee”?

The Chargeback Fee is a fee that the customer’s banking institution charges the merchant when the disputed funds are returned to the cardholder. Since the dispute can only be resolved by a Banking Institution Representative, fees are charged per disputed transaction to cover the cost of the bank processing the chargeback.

These chargeback fees would then be reflected on the Payout Report. It is a common practice for card processors to charge a fee for each disputed and reimbursed transaction.

Can I Dispute a Chargeback?

Yes, you can always submit information to dispute a chargeback.

How Do I Avoid Chargebacks?

If there is a mistake on an order or the customer did not receive part of their order, it is often better to try to resolve the issue directly with the customer than to risk a chargeback and the accompanying chargeback fee. Contact the customer immediately to initiate a refund on the merchant’s end or offer in-store credit.

See also Tips for Detecting Fraud to learn some healthy business practices to avoid and prevent fraudulent charges.