A customer disputes a payment with their bank. The money leaves, fees are added, and you have to prove the sale was legitimate. The process does not run between you and them but between two banks, which changes everything.
Definition
A chargeback is the reversal of a transaction at the cardholder's request through their bank, which recovers the funds from the merchant.
It differs from a refund on one decisive point: a refund is your decision, a chargeback is imposed on you, and it carries fixed fees you pay even if you win.
Above a certain dispute rate, generally around 1 percent of transactions, card networks impose monitoring programmes on your Payment processor, which may suspend your account. So the risk is not purely financial.
The real reasons, by frequency
| Reason | What prevents it |
|---|---|
| Unrecognised statement descriptor | A descriptor matching your trading name |
| Forgotten subscription | Notice before each significant charge |
| Cancellation impossible to find | A two-click cancel button |
| Product not as promised | An accurate Sales page |
| Genuine card fraud | Strong authentication |
The first row is by far the most frequent, and the most absurd: the customer does not recognise the name on their statement and reports fraud in good faith. Checking that descriptor takes five minutes and avoids a good share of disputes.
What drives them down
- An easy refund. A Money-back guarantee honoured without argument prevents almost every legitimate dispute: the customer has no reason to go to their bank.
- Support that replies. A chargeback is often the last resort of someone who got no answer.
- Clear confirmation emails. They also serve as evidence if you have to contest.
- Well-tuned Dunning. An unexpected charge after a period of inactivity is a classic trigger.
Frequently asked questions
Should I contest a chargeback?
Only with solid evidence: delivery, content access, written exchanges. Contesting with nothing costs time and the fees remain due. On small amounts the arithmetic often favours letting it go.
Is it better to refund before one arrives?
Almost always. A refund costs the sale. A chargeback costs the sale, the fees, and a point on your dispute rate. Facing an unhappy customer who threatens one, refunding is the economically rational decision.
What rate should I watch?
Track it monthly from the first dispute. A rate approaching 0.5 percent deserves immediate action, before reaching the thresholds that trigger monitoring of your account.
Can I refuse to serve a customer who filed one?
Yes, and it is reasonable after an unjustified dispute. Blocking a customer upfront costs less than another case, and the rate is calculated across all your transactions.