Definition: Chargebacks are a form of consumer protection where a card company or bank requests a charge from a merchant to be reversed. Chargebacks can result from unintentional mistakes or malicious intentions, and merchants can be subject to penalties if chargebacks exceed a defined threshold.
Chargebacks protect consumers from fraudulent charges, acting as a last line of defense that prevents them from being financially responsible for any unapproved withdrawal of funds. Though the purpose of chargebacks is to prevent deliberate acts of fraud — such as purposefully overcharging or making additional withdrawals — they can also result from a simple miscommunication.
For example, a customer can dispute a charge because they didn't understand that shipping was not included in the base price. These types of chargebacks can typically be resolved between the merchant and customer, but some consumers choose to go directly to their bank.
Whether a customer makes an inquiry to their credit card company to have charges reversed due to fraudulent purchases, not receiving their order or receiving goods that are unsatisfactory, the process is the same. The chargeback process can be lengthy involving many steps and investigation. The key steps are highlighted below:
Chargebacks rightfully give consumers a means to dispute unlawful and dishonest charges. However, even the most reputable online retailers still receive chargeback requests from genuine mistakes and miscommunications.
There are ways to limit the number of chargebacks and prevent unauthorized use of cards by watching out for red flags such as: