What is a chargeback and how does it work?

A chargeback is a request from the customer to return their money. This usually happens when fraud has been committed and a consumer doesn't recognize a transaction on his or her statement. It also happens when a customer is not happy with their purchase (It arrived damaged, it did not arrive in time, a different product was sent than paid for, the order never arrived).

When a customer is not satisfied with their order, they can request their money back. By issuing a chargeback, the merchant has a certain amount of time to prove that they did in fact fulfill their duty to the customer.

In a case where a chargeback is denied, no money has to be given back, but the merchant still has to pay the chargeback fee. If the chargeback is approved, the merchant not only has to return the money, but is also fined. Also – the more chargebacks, the higher the risk that a business will lose its trust and in turn can be shut down.

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