What Is a Chargeback?

A chargeback is a forced reversal of a card payment. It happens when a customer disputes a charge with their bank or card issuer, and the bank takes the money back from the seller's payment processor, which then collects it from the seller.

Why chargebacks happen

Common reasons include an order that never arrived, an item that was not as described, a charge the customer does not recognize, a duplicate charge or fraud, where someone used a card without permission. Some customers dispute a payment instead of contacting the seller, especially when the seller is slow to reply.

What it costs

The seller usually loses the sale amount, and the processor may add a dispute fee. The seller may also lose the product and its shipping cost. Too many chargebacks can lead the processor to hold funds, raise fees or close the account.

How sellers respond

Most processors let you submit evidence within a deadline, such as proof of delivery, messages with the customer, your policies and the product description. The bank decides. Responding quickly and keeping good records improves your chances.

How to reduce them

State delivery times honestly, share tracking, use a clear business name on the customer's statement, reply fast to messages and refund promptly when you cannot deliver. A refund you issue yourself is usually cheaper than a dispute.

An example

A customer orders a product from a store that ships from abroad. The parcel is late, and the customer disputes the payment with their bank. The seller submits tracking and messages, and the bank decides who gets the money.

Related terms

See payment processor, dropshipping and sales tax. For more, read our page on invoices, refunds and chargebacks.