Chargeback
Also called payment dispute, dispute.
A forced reversal of a card payment, started by the cardholder's bank after the cardholder disputes the charge.
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What it is.
When a cardholder tells their bank a charge is wrong, for example fraud, an item not received or a cancelled subscription still billed, the bank can pull the money back from the merchant through the card network. The merchant can respond with evidence, and the bank decides.
Each card network has its own dispute rules, reason codes and deadlines. Merchants usually pay a fee per chargeback whether they win or not, and payment providers watch chargeback rates closely.
Why it matters
Chargebacks cost the sale, the fee and staff time. For marketplaces and subscription products they are a real line in unit economics. Good receipts, clear billing names, easy cancellation and delivery evidence prevent many of them and help win the rest.
In a product build
In a payments or marketplace build, chargebacks need a webhook handler, a dispute status on orders, an evidence pack builder and rules for who bears the loss, such as the seller on a marketplace.
Common mistakes.
- 01
Treating disputes as rare and handling them by email.
- 02
A billing descriptor customers do not recognise on their statement.
- 03
Missing response deadlines, which loses disputes by default.
Work it out with a tool.
Related terms.
- Settlement (payments)The point when money for a payment actually moves into the receiver's account, after the payment was approved and cleared.
- ReconciliationChecking that two records of the same money agree, such as your ledger and the bank or provider's statement, and explaining every difference.
- Strong customer authentication (SCA)The EU rule under PSD2 that online payments and account access must be confirmed with two independent factors from different categories.
- LedgerThe record of every movement of money in a system, kept so that any balance can be explained entry by entry.
Guides and pages
Browse the full glossary or read answers to common questions.
