What Is a Chargeback?: Everything You Need to Know


Did you know that cardholders usually have 120 days to file a chargeback for several different legal reasons? If you are a new business owner you might be wondering how a chargeback can impact your business. We are here to share the ins and outs of what a chargeback is, when consumers are allowed to open a chargeback dispute, and how much this can cost you as a business owner.

Keep reading to learn everything chargeback-related.

What Is a Chargeback?

The simplest definition of a chargeback – it is a credit card payment that is reversed directly by the bank. This only happens when a customer calls their credit card company or their bank to dispute a charge they don’t agree with and the outcome is in their favor.

A chargeback is considered a protection tool for consumers to make sure they do not have to pay in the case of fraudulent purchases made with their debit or credit cards.

When Can a Customer Make a Dispute?

It is good to understand when customers can open a dispute because chargebacks will affect your business. A customer can request a chargeback if they never receive the packages that they ordered or if the products were either defective or damaged.

Customers can also request their money back if they were not charged the correct amount. In these cases, they will receive the difference in what the charge should have been.

Victims of identity theft can also legally request for the charges to be investigated and returned back to their account. Every credit card and bank account is different when it comes to the timeframe they allow for a charge to be disputed. Before you open a dispute you will have to double-check whether or not you are past the timeframe.

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Chargeback Costs

As a business owner, you understand that chargebacks have short term and long term effects for your company. Every time a customer files a chargeback the business is charged a fee that ranges between $20 to $100 per transaction. Even if the customer decides to cancel the chargeback in the future, the merchant is still responsible for the fees and the administrative costs that come with chargebacks.

When a customer files a chargeback but in reality received the product and keeps it, the merchant loses that profit and product which they can’t resell.

If you have a subscription-based business this chargeback calculator will help you calculate and understand the impact of chargebacks on the revenue of your company.

Feeling Like a Chargeback Pro?

Now that you know more about what a chargeback is and how it can impact your business, we hope that it will motivate you to work hard to reduce the risk of receiving chargebacks. If you are offering great customer service and communication from beginning to end in the customer experience journey it will help keep consumers from filing a valid chargeback.

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