What Is a Chargeback? How the Process Works

A chargeback is a payment dispute that a cardholder raises with the bank that issued their card instead of contacting the merchant. If the bank accepts the dispute for review, the payment is questioned, the merchant is asked to respond with evidence, and the bank decides whether the payment stands or is reversed.

In short

• A chargeback starts with the customer's bank, not with the merchant.
• Common causes are unrecognised charges, items not received, items not as described and billing errors.
• The usual flow is: dispute raised, merchant notified, evidence submitted, bank decides.
• Good records, clear policies and quick support replies prevent many disputes.

What is a chargeback?

A chargeback is a way for a cardholder to ask their bank to question a card payment. The cardholder is the person whose card was used. The issuing bank is the bank that gave them the card and holds their account.

When the issuing bank opens a dispute, the merchant is told and given a chance to respond. The merchant does not control when this starts, and the bank, not the merchant, makes the decision.

How is a chargeback different from a refund?

A refund is something the merchant chooses to do. The merchant agrees the customer should have money back and sends it. A chargeback is something the customer starts through their bank, and the merchant can only respond to it.

Many chargebacks begin as ordinary complaints that were never resolved, or were never raised with the merchant at all. To see how a payment travels before any dispute happens, read our walkthrough on how a card payment moves. For the merchant-led alternative, see how card refunds work.

Why do customers raise chargebacks?

Every bank and card network has its own list of reason codes, and the labels differ. In general terms, most disputes fall into a few broad groups.

• Fraud or an unrecognised charge. The cardholder says they did not make the payment, or they do not recognise the name on their statement. Sometimes a card really was misused. Sometimes the customer simply does not connect the statement line with your business.
• Item or service not received. The customer says the goods never arrived, arrived too late, or the service was not delivered.
• Not as described. The product or service was different from what was promised, was faulty, or did not match the listing.
• Billing errors. The customer was charged twice, charged the wrong amount, or kept being charged after cancelling.

Only one of these groups is about a stolen card. Many disputes come from confusion, unclear policies or a slow reply to a support message, which are things a merchant can influence.

What are the stages of a chargeback?

The details depend on your agreement and on the rules that apply to the card used, but the shape of the process is usually similar.

• Dispute raised. The cardholder contacts their bank and explains why they dispute the payment. The bank may ask questions and then decide whether to open a formal dispute. Depending on the case, the amount may be taken back from the merchant's side while the matter is open.
• Merchant notified. Your payment provider tells you a dispute exists. The notice normally includes the transaction, the amount, the reason category and the date by which you must respond. Deadlines vary, so check the exact terms in your own agreement and in the notice itself rather than assuming a standard period.
• Evidence submitted. This is your chance to explain what happened. You gather records showing the sale was genuine and that you delivered what you promised, then send them through the channel your provider gives you. This step is often called representment, which simply means presenting your side of the case. Our guide on how to upload evidence for a dispute walks through it.
• Bank decides. The issuing bank reviews the cardholder's account and your evidence. If it sides with the cardholder, the payment stays reversed. If it sides with the merchant, the amount is returned. Some processes allow a further round, and the rules for that vary.

No merchant can be promised a particular outcome, because the decision rests with the bank and depends on the facts of each case.

What evidence should merchants keep for a chargeback?

You cannot build a response after the fact if the records were never saved. Merchants commonly keep the following.

• Order records. What was bought, when, at what price, and which account or email placed the order.
• Proof of delivery. Shipping confirmations, tracking details and delivery signatures, or for digital goods, records showing access was provided.
• Communication. Emails or chat messages with the customer, including any promises made and any replies to complaints.
• Clear policies. The terms, refund policy and delivery information the customer saw at checkout, ideally with a record that they agreed.
• Safe payment details. Transaction references and timestamps, never full card numbers.

A tidy folder per order, or a system that links these records to each transaction, saves time when a notice arrives. Our guide on how to view and export transactions shows one way to pull those records together.

How can merchants reduce chargebacks?

You cannot prevent every dispute, but good habits remove many of them.

• Use a clear billing descriptor. The name on the card statement should be one the customer will recognise.
• Show policies early. Put delivery, cancellation and refund terms near the pay button, not only in a footer link.
• Respond to support quickly. A customer who gets a helpful answer is less likely to call their bank.
• Refund when it is the right thing to do. A fair complaint is usually simpler to settle with a refund than with a dispute. See how to refund a transaction.
• Describe products honestly. Accurate listings and photos reduce "not as described" disputes.
• Keep customers informed. Order confirmations, shipping updates and renewal reminders prevent surprise charges.

Key takeaways

• A chargeback is a dispute the customer raises with their own bank, not with the merchant.
• Common reasons include fraud, items not received, items not as described and billing errors.
• The usual stages are dispute raised, merchant notified, evidence submitted and bank decides.
• Deadlines and time limits vary, so check them in your own agreement and act promptly.
• Order records, delivery proof, customer communication and clear policies make a response possible.
• A clear descriptor, clear policies, responsive support and fair refunds prevent many disputes.

Frequently asked questions

Is a chargeback the same as a refund?

No. A refund is a payment the merchant chooses to send back to the customer. A chargeback is a dispute the customer starts with their own bank, and the bank decides the outcome after the merchant has had a chance to respond.

Who decides the outcome of a chargeback?

The cardholder's issuing bank decides. It reviews the cardholder's account and the evidence the merchant submits, then either keeps the payment reversed or returns the amount. Neither the merchant nor the payment gateway can guarantee a particular result.

How long does a merchant have to respond to a chargeback?

It depends on your agreement and the rules that apply to the card used. The dispute notice normally states the response date, so read it carefully, check your own agreement, and act as soon as possible instead of assuming a standard period.

Can a merchant prevent every chargeback?

No. Some disputes come from genuine fraud or from customers who act in bad faith. Clear descriptors, honest listings, visible policies, quick support and fair refunds still remove many avoidable disputes and leave you better prepared for the rest.

What happens if a merchant ignores a chargeback notice?

If you do not respond, the bank usually decides using only the cardholder's account, which makes a result in the merchant's favour unlikely. Check your agreement for the exact consequences, and respond within the stated deadline whenever you can.

Where to go next

Related reading: what 3-D Secure is and why it matters explains one way to add cardholder checks before a payment completes.

EPaySe is a payment gateway in development for high-risk and regulated businesses, reviewed and approved case by case. If you have questions about disputes in your own setup, contact the EPaySe team.

This article is general information, not legal, tax or financial advice. Check with your own advisor before making decisions about your business.