How a chargeback works
The cardholder tells the issuer that a payment was not theirs, that goods never came, or that a refund is missing. If the claim fits one of the scheme's dispute reasons, the issuer sends the transaction back through the scheme. The amount is debited from the acquirer, which debits the merchant.
The merchant may accept the loss or answer with evidence through its acquirer. Visa's rules call the whole matter a dispute, defined as a transaction that an issuer returns to an acquirer, while Mastercard keeps the word chargeback.
What a chargeback costs a merchant
- The transaction amount, returned to the cardholder
- A chargeback fee from the acquirer or PSP
- The goods or service, usually already delivered
- A higher chargeback rate, which the schemes monitor
Why chargebacks matter to a payments business
A chargeback is a scheme rule, not a court ruling. The issuer and the acquirer are bound by it as members of the scheme, and the merchant is bound through its merchant agreement.
The acquirer or payment facilitator stands behind its merchants: if a merchant cannot pay, the loss stays with the acquirer. That is why acquirers underwrite merchants, hold reserves and watch chargeback rates from the first transaction.
Chargeback, refund or dispute?
- Refund
- Started by the merchant, who returns the money willingly. A chargeback is started by the issuer, carries a fee and counts in the merchant's chargeback rate.
- Dispute
- The cardholder's claim, and Visa's name for the whole process. A dispute becomes a chargeback when the issuer formally returns the transaction.
- Payment reversal
- Cancels an authorisation before the payment is settled. A chargeback acts on a payment that has already been settled.
Where a chargeback shows up in a platform
Modules that do the work
- Card acquiringCard acceptance on the phone, in store and online, through the acquirer you choose.
- Fraud & riskReal-time fraud scoring, limits and case management, with the risk engines you already trust.
- Merchant onboardingBusiness sign-up, verification and underwriting, from application to first payment.
- LedgerThe double-entry book of record behind every balance, fee and transfer.
Platforms that need it
Guides that go deeper
Where it is written
The laws and standards this page's facts come from.
General information, not legal advice: what applies to you depends on your services and your market.