What is a Chargeback?

A Chargeback is a reversal of a credit card transaction initiated by the cardholder or the card issuing bank that was used in the purchase. This is different from a refund or a credit that is agreed to and initiated at the point of sale. A Chargeback usually occurs when a when the cardholder files a dispute with their card issuing bank. This can happen when the cardholder discovers fraudulent or improper transactions on their statement.

The card issuing bank will investigate disputes and will charge back the value of the original transaction directly from the merchants acquiring bank, which is obligated by to do so under the card network rules and regulations. The merchant acquiring bank will attempt to recover an equal amount of the chargeback from the merchants bank account. Chargebacks are passed along to the merchant as policy from the acquiring bank unless the merchant can prove that the transaction in question was legitimate.