Skip to content

How the Credit Card Chargeback Process Works

Chargebacks are a risk when you accept payment by credit card. Chargebacks are almost always a result of a dispute raised by the customer, but sometimes banks can raise disputes as well. So why do chargebacks happen?

The 4 most common reasons why chargebacks happen:

  1. Fraud: the credit card has been used without the authorization and consent of the cardholder. In cases of fraud, the merchant is held solely responsible.
  2. Credit not processed: the customer has returned the purchase to the merchant and asked for a refund. The merchant ignores the query and does not pass a credit reversal. Eventually, the customer raises a dispute and requests a chargeback. The merchant is held liable for the charges.
  3. Item not received: the customer claims that they did not receive the goods or services that they paid for. A dispute is raised, and it is vital that merchants respond to these claims if they can prove that the goods or services were delivered. If the merchant ignores the dispute, they will be liable for charges.
  4. Technical problems: often chargeback requests are due to technical problems during the payment processes. Technical problems between the issuing bank and the merchant may lead to customers being charged twice for the same transaction (duplicate processing). Problems with the authorization process can also lead to the customer being charged, even if the transaction was declined.

Other issues that can result in chargebacks. That is why it is vital that merchants don’t ignore chargeback communications from their merchant service provider.

What is the chargeback process?

The chargeback process is complicated and involves different entities. Typically, a chargeback process takes anywhere from 6 weeks up to 6 months. This is the process:

  • The cardholder raises a dispute with their issuing bank
  • The issuing bank validates the dispute, and if it is valid they initiate the chargeback process
  • Provisional credit is given to the cardholder, and the bank proceeds to claim the refund from the merchant’s acceptor bank
  • The merchant acceptor bank begins to investigate the chargeback and notifies the merchant of the pending chargeback request
  • The merchant’s acceptor bank concludes whether chargeback is found to be valid or invalid.  If it is invalid, the customer will be charged for the sale again.
  • If the chargeback is found to be due to a processing error, it will be corrected
  • The merchant may be asked to provide documentation or proof. If the documentation provided is acceptable, the claim for a chargeback will be denied, and the customer will again be charged for the sale.
  • If the documents provided by the merchant are not acceptable, then some or all of the chargeback amount will be given to the customer at the expense of the merchant and the merchant will be liable for additional costs

It is impossible to avoid chargebacks completely, but you can keep them at a minimum by responding to all customer queries and notices of pending chargebacks from your merchant service provider.

For more information about how the chargeback process works, or to sign up for a merchant account, , please call (888) 924-2743 or go to


Leave a Comment