Updated
GL-C-05
Glossary · Banks and finance
Chargeback - reversing a card payment through your bank, not the seller
01 / In 30 seconds
The short answer
- What it is
- A forced reversal of a card payment through the cardholder’s bank
- Who starts it
- The buyer, by going to their own bank rather than the seller
- Typical reasons
- Goods not received, service not provided, transaction not made
- How it differs from a refund
- A refund is made by the seller voluntarily; a chargeback is forced by the bank
- What it means for a business
- The sum is debited, a penalty, and a rising refund ratio up to closure of the account
02 / In plain words
What Chargeback means
A chargeback is a forced return of money on a card transaction, initiated not by the seller but by the cardholder’s bank. Put simply: the buyer goes not to the shop but to their own bank and disputes the charge, and the bank investigates and, if the claim is justified, takes the sum back from the seller.
It must not be confused with an ordinary refund: that is made by the seller voluntarily, by agreement with the customer. A chargeback is a dispute through the card scheme, with a formal procedure, deadlines and an obligation on the seller to prove that the goods were delivered or the service provided. The grounds vary: goods not received, a service not as described, a transaction not made by the cardholder.
For a business it means not only losing the sum but also a reputational indicator. Card schemes and banks have thresholds for the acceptable share of chargebacks: exceeding them leads to penalties, more expensive acquiring and closure of the merchant account. That is why it pays to resolve disputes directly with the customer before they go to the bank.
A case from practice
A client paid a foreign contractor for a service by card, the service was not provided, and the contractor did not answer emails. Going to their own bank with the correspondence and the contract attached made it possible to start a dispute and get the money back — through the procedure rather than negotiation.
When it concerns you
- Paying by card for a service not provided
- A charge you did not make
- A dispute with a foreign seller
- Accepting payments in your business
- Assessing a company’s payment risks
- Preparing for a bank check
03 / What it covers
How the dispute works
The buyer
- Goes to their own bank
- States the grounds
- Keeps to the deadlines
Bank
- Checks the justification
- Requests documents from the seller
- Takes a decision
The seller
- Proves delivery
- May challenge the decision
- Bears the costs if it loses
Consequences
- Card scheme penalties
- Higher tariffs
- Closure of the merchant account
04 / How it works
How the process works
The buyer goes to their bank
A claim to the bank that issued the card, describing what happened.
The bank checks the grounds
The bank checks whether the case fits the card scheme rules.
Documents requested from the seller
The seller must prove the goods or service were provided.
A decision on the dispute
The bank weighs the documents from both sides.
Refund or rejection
The money is returned to the buyer or the claim is rejected.
05 / Key facts
What you need to know
01Who starts it
The cardholder, through their bank
The buyer disputes the charge with the bank that issued the card. The seller becomes the other party to the dispute.
02Grounds
Goods not received, service not provided
Or the service does not match its description, or the cardholder did not make the transaction.
03Difference from a refund
A refund is voluntary, a chargeback is not
The seller issues a refund itself. A chargeback follows card scheme rules, with deadlines and evidence.
04For a business
The chargeback ratio is a risk indicator
Exceeding the threshold leads to fines, costlier card acquiring and closure of the merchant account.
Common mistakes
Delaying the claim with your bank
File the dispute as early as possible: card scheme rules set time limits.
Going to the bank without evidence
Attach the contract, correspondence and proof the service was not provided.
For a seller - not keeping proof of delivery
Keep contracts, delivery records and correspondence to answer the bank on time.
For a seller - ignoring a customer complaint
Settle the dispute directly before the customer goes to the bank.
06 / Expert advice
How to prepare in advance
A business should keep evidence for each transaction: a description of the service, proof of delivery, correspondence with the customer, agreement to the terms. Customer complaints are answered quickly — most disputes are closed before they reach the bank. A buyer should remember the deadlines: the bank must be approached within the limits set by the card scheme’s rules.
What we do for you. We advise paying contractors abroad in such a way that you keep documents and a clear payment trail. This protects you both in a dispute and later — when a bank or a programme asks what the money was paid for.
Klara RihterBanking compliance and source of funds specialist
07 / Questions
Frequently asked questions
A refund is made by the seller voluntarily. A chargeback is a forced procedure through the cardholder’s bank, with deadlines and an investigation.
Go to the bank that issued your card with a description of the situation and supporting documents. The seller is the other party to the dispute in this process.
Yes, they are set by the card schemes’ rules and are limited. It is not worth delaying the claim.
No. The bank assesses the justification and both parties’ documents. If the seller proves that the service was provided, the refund will be refused.
The sum is debited, there is a penalty, and the chargeback ratio rises. Exceeding the acceptable ratio leads to more expensive acquiring or closure of the merchant account.
Answer customers quickly, keep proof of delivery, describe the terms clearly and resolve disputes before the customer goes to the bank.
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