Chargeback

What Is A Chargeback?

Chargeback is a consumer protection tool that allows consumers to get a refund of the amount charged on their debit or credit card after they successfully dispute the transaction or return the purchased goods.

Deeper Definition

If you paid for an item online using your debit or credit card but never received it, or it arrived damaged, you may want your money returned to you by filing a complaint and requesting a chargeback. A chargeback is a reversal of funds after an electronic payment has already been fully processed and settled. Usually, it could take several days for the banks or financial institutions involved to complete the process.

Chargebacks are similar to refunds because a buyer’s money on a purchase gets returned to their accounts. However, it is different because a refund involves the merchant transferring the money back to the buyer. In the case of a chargeback, the bank or financial institution that issued the buyer’s payment card is responsible for reversing the funds.

Chargebacks exist primarily for consumer protection. Essentially, you should request a chargeback if a merchant refuses to refund your money after a legitimate dispute. For instance, if you purchase an item from a merchant and it arrives damaged or different from what you expected, your first line of action should be to contact the merchant directly or their customer support and request a refund. If the merchant is unwilling to process the refund, you may then initiate a chargeback with your card issuer for them to reverse the transaction.

A chargeback process varies depending on the card issuer. Usually, it begins with a request from the cardholder. The cardholder will need to provide supporting documents, such as copies of a receipt, invoice, contract, and communications with the merchant. The process usually takes several days, involving some back-and-forth between various parties, including the card issuer, the merchant, and their bank.

Chargeback Example

Daniel ordered a Juicer through a mobile app. When the company delivered the item, he observed that the Juicer was faulty, so he returned it and requested a refund. The merchant is reluctant to refund his money, so Daniel initiates a chargeback request with his credit card issuer. After some days, the card issuer reversed the payment he made for the Juicer, allowing Daniel to purchase it elsewhere.