What is a chargeback? How card disputes work, and how businesses can avoid them
By SendPay Business · · 2 min read
A chargeback is when a cardholder asks their card issuer to reverse a payment, and the issuer takes the money back from the business. It protects shoppers from fraud and from firms that don't deliver, but it can cost an honest business money and time.
Why customers raise them
- The payment was made with a stolen card.
- The goods or service never arrived, or weren't as described.
- They were charged twice, or charged after cancelling.
- They don't recognise the name on their statement.
How the process works
The cardholder contacts their issuer, which takes the money back from the business's payment provider. The business is told and can send evidence, such as proof of delivery or the customer's agreement. The issuer then decides, under the card scheme's rules.
What it costs
The business loses the payment while the dispute runs, and usually for good if it loses. Most payment providers also charge a fee for each chargeback, and a high rate of them can lead to extra checks or a closed account.
How to cut them down
- Use a business name customers will recognise on their statement.
- Send clear receipts and invoices, and reply quickly to complaints.
- Make refunds easy, so customers ask you before they ask their bank.
- Keep proof of delivery and of what the customer agreed to.
Build it
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Build my platform →Questions people ask
Is my chargeback rate too high?
Work out your ratio and how close it is to your limit.
Chargeback ratio calculator →Is a chargeback the same as a refund?
No. A refund is given by the business. A chargeback is forced through by the cardholder's bank.
How do I send a clear invoice?
The free invoice generator makes a professional invoice with your details and payment terms.
Invoice generator →What other payments words should I know?
The glossary explains them in plain English.
Payments glossary →Read next
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.