What is a chargeback?

A chargeback is a reversal of a card transaction initiated by the customer through their bank. It occurs when a customer disputes a charge - often due to fraud, billing errors, product dissatisfaction, or undelivered goods.

Once a chargeback is filed, the transaction amount is temporarily deducted from your account while the case is reviewed. Even if the original payment was authorized, disputes can still result in chargebacks.

Most chargebacks are submitted within 120 days of the transaction or service date. In some cases, this window can extend to 540 days.

How do chargebacks affect your business?

Chargebacks can have financial and reputational consequences:

• You won’t be refunded the transaction fee for disputed payments.
• High chargeback rates may lead to fines or increased processing fees.
• Excessive disputes can result in stricter terms - payment processors may impose higher fees to cover the risk, or they might stop doing business with you.
• Your company’s reputation can be tarnished.  
• Managing disputes requires time, documentation, and resources which incur additional operational costs.

How can you avoid chargebacks?

Review your daily deposit account (DDA) to ensure all transactions are legitimate and respond promptly to disputes with clear documentation when they occur.

We also recommend you to regularly monitor your chargeback trends to identify and resolve recurring issues.