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What is a Chargeback


A chargeback is a form of customer protection. It refers to cases where a payment is reversed and funds are returned to the customer.

Typically, this is because a customer reports a transaction as fraudulent but there can be other reasons:

Unauthorised Payments: When a child or other family member uses the card to make purchases without the cardholder’s permission.

Merchant Error: Covers things like the goods not matching with the description of what was ordered, the card being billed the incorrect amount, discounts not being applied or being billed twice for the same purchase.

Logistical Problems: If the goods do not arrive because they are lost or stolen in transit, if they are damaged or arrive too late to be of use to the customer.

Buyer Remorse: Sometimes referred to as ‘friendly fraud’ this category involves customers who may regret a purchase and seek to have the funds returned even though the purchase was legitimate. It also covers customers who understand the nature of the chargeback process and maliciously seek to abuse it for their own benefit.

The chargeback is an essential tool in preserving cardholder rights and, in most cases, the customer is genuine.

The mechanism is provided by credit card companies such as Visa, Mastercard and Amex.

Chargebacks help drive customer satisfaction as customers can always ask for a chargeback if the goods they ordered don’t meet their expectations or if the product never arrived. It also deters sellers from selling sub-par products as they know they won’t be able to charge unless the customer is satisfied.

Cardholders need to report any fraudulent activity as soon as they notice it as it allows the bank to act fast and prevent any further losses.

However, if it’s a mere dissatisfaction with a product, customers are advised to contact the merchant directly and ask for a refund instead.

Merchants can challenge a claim if they believe it to be is spurious. This can be a long and time-consuming process. As a result, it is better to try and avoid such incidences altogether. Good customer support, complaints handling and fraud detection processes can all help in this regard.

Payments Glossary

The world of payments is littered with jargon. The Prommt Payments Glossary can help you get to grips with it all. It provides easy definitions for all of the common terms and acronyms you’ll encounter when talking payments.

You can find definitions for terms like chargeback, issuer, acquirer, gateway and many, many more.

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Prommt Payments Glossary