Definition
A chargeback is the reversal of a card payment initiated by the cardholder's bank after the customer disputes the charge. The money is pulled back from the business, usually with a dispute fee, while the business has a limited time to submit evidence that the charge was valid. Chargebacks protect consumers from fraud and undelivered goods.
Also called: Payment dispute, Card dispute
Chargeback in practice
Common reasons include fraud claims, goods or services not received, items not as described, duplicate charges, and cancelled subscriptions that kept billing. Some chargebacks are honest mistakes, such as a client not recognizing your business name on their statement.
To fight a chargeback, submit evidence through your payment provider: the invoice, signed quote or contract, proof of delivery, communication with the client, and any terms they accepted. Clear, itemized invoices and signed approvals make disputes far easier to win.
Too many chargebacks can lead to higher fees, a reserve on your payouts, or loss of your ability to accept cards, so resolve complaints directly before clients go to their bank.
Example
A client disputes a $1,200 card payment, saying the work was never delivered. The designer submits the signed quote, the delivery email with files attached, and the client's thank-you reply, and the bank rules in her favor.
Frequently Asked Questions
How long does a customer have to file a chargeback?
Often 120 days from the transaction or expected delivery, though limits vary by card network, dispute reason, and country. Some reasons allow longer windows.
What is the difference between a chargeback and a refund?
A refund is issued by the business voluntarily. A chargeback is forced by the cardholder's bank and usually comes with a fee and a mark against your account.
Related terms
- Refund A refund is money a business returns to a customer for a payment already made, in full or in part, because goods were returned, a service was cancelled, the customer was overcharged, or as a goodwill gesture.
- Merchant account A merchant account is a type of business bank account that lets a business accept card payments.
- Payment gateway A payment gateway is the service that securely captures a customer's card or bank details online and passes them to the payment networks for authorization.
- Invoice dispute An invoice dispute is a disagreement in which a client refuses to pay all or part of an invoice because they believe it is wrong, for example due to pricing errors, unapproved charges, incomplete work, or quality problems.
This page is for general information only and is not legal, tax, or financial advice. Rules change and vary by location, so consult a qualified lawyer or accountant about your situation.