Chargeback

What is chargeback?

Chargeback is the process of returning money for a purchased product or service. Most commonly used in ecommerce in respect of online transactions. Chargeback reverses money from your bank account to your customer’s account.

Chargeback and refund: the difference

Although technically it’s the same fact of returning money, the processes are different. To get a refund, a customer contacts the seller, while for chargeback, a customer has to contact the bank to ask them to forcibly take the money from your account and transfer it back to the customer’s account.

The bank starts an investigation and if it decides the request was valid, it makes a transfer.

Chargeback’s main purpose is to keep shoppers feel secure while buying online — to protect them from possible fraud actions.

When can I file a chargeback?

Customers can’t start a chargeback process just because they want to return the money. First, they have to prove they faced a fraud situation and did everything they could to resolve it peacefully and legally. If they did, the bank will validate the request and interfere.

Example #1 Identity or card loss.
Someone can steal a card or card credentials from the customer and make a purchase online. In this situation, the real cardholder doesn’t have to contact a merchant to ask for a refund, because it won’t fix the problem. The cardholder has to contact the bank and prove the fact of identity or card loss and file a chargeback. This is a standard procedure in this situation.

Example #2 Unfair business behavior
If you as an online store promise refunds within the first 30 days after the purchase but reject to refund a customer within this period without a strong reason, this is unfair behavior. In this case, an unsatisfied customer can contact the bank to file a chargeback, providing proof of legal refund request and the act of unfair business practice. The bank will check your policy rules, your communication, and most likely satisfy the chargeback request. Try to avoid this situation as it can harm your reputation among customers and financial organizations.