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What is a chargeback?

A chargeback happens when a cardholder’s issuing bank refunds the cardholder by reversing a transaction that has already been processed. There are a number of reasons for this to occur but most of them are initiated by the customer. Forcibly withdrawing funds from a merchant’s bank account like this allows issuing banks to protect their cardholders in situations such as unauthorized or fraudulent transactions. Chargebacks are not final, however, and can be disputed by a merchant by presenting documentation of the transaction.

How does a merchant know they got a chargeback?

A chargeback should be mentioned somewhere on the monthly merchant statement. Alternatively, it will be mentioned in online portals used to monitor transactions, if offered by a merchant’s processor. Wherever indicated, the notification should include the transaction amount that has been refunded to the cardholder as well as the fee incurred for the chargeback, often about $15.

TransparencyX merchants

If you’re a TransparencyX merchant, the first page of your monthly merchant statement gives a summary of the month’s transactions and charges, including the total transaction amount in question. If this amount is $0, you did not have any chargebacks. If this amount is not $0, visit the page indicated to see a breakdown of the chargebacks and visit the “Fees Charged” section to see the total fees charged for these chargebacks.

Alternatively, you may have received a merchant statement analysis report. This will also indicate the number of chargebacks, the total transaction amounts, and the fees charged.

Disputing or preventing chargebacks

If a merchant receives a chargeback, their processor will mail them information about their options, which will vary depending on the chargeback's reason text i.e. the description of the chargeback's cause. In some cases, such as the "No authorization" chargeback, it may be possible to dispute the chargeback by providing evidence such as transaction receipts that will prove the transaction's legitimacy. The information sent by the process will indicate which documents are required, where to send them, and any applicable deadlines.

In other cases, however, such as "EMV card, non-EMV device" it is not possible to dispute the chargeback and have the transaction funds returned to the merchant. Instead, a merchant can only take steps to prevent this type of chargeback in the future. To prevent "EMV card, non-EMV device" chargebacks, a merchant must start using an EMV terminal.

Reason text
This is the description identifying the chargeback's cause, for example "No Authorization.”