Chargeback

A chargeback is a reversal of a credit card transaction initiated by the cardholder's issuing bank. It returns funds to the cardholder after a disputed transaction. Chargebacks help protect consumers from unauthorized or fraudulent transactions, but they can also create financial loss and administrative work for merchants.

Example

A customer buys a product from an online store with a credit card. When the product arrives, they find it is damaged or not as described. The customer contacts their credit card issuer to dispute the transaction, and the issuer initiates a chargeback, reversing the funds to the customer's account. The merchant is then debited for the transaction amount and may also face added fees or penalties. Merchants can reduce chargebacks by providing accurate product descriptions, keeping communication with customers clear, and putting in place strong fraud prevention measures.