Learn About Chargeback Process and Steps

Understanding What a Chargeback Is and Why It Matters

A chargeback is a transaction reversal initiated when a cardholder disputes a charge on their credit or debit card. When you use a card to make a purchase and later believe the transaction was unauthorized, fraudulent, or the merchant failed to deliver promised goods or services, you can contact your card issuer to dispute the charge. Your bank or credit card company then investigates the claim and may return the funds to your account.

Learn About Unemployment Benefits Registration Steps →

The chargeback process exists as a consumer protection mechanism. According to the Federal Reserve, chargebacks help prevent fraud and hold merchants accountable for problematic transactions. In 2022, chargebacks in the United States totaled approximately $117 billion across all transaction types, though this includes both legitimate disputes and fraudulent claims.

Understanding how chargebacks work matters for several reasons. If you're a consumer, knowing the process helps you recover money when something goes wrong with a purchase. If you're a merchant or business owner, understanding chargebacks is critical because excessive chargeback rates can damage your business operations, increase your fees, and even result in losing your merchant account entirely. The Nilson Report indicates that merchants face chargeback rates averaging between 0.5% and 1.5% of transactions across different industries.

The chargeback process differs from a simple refund request. When you ask a merchant for a refund, they choose whether to return your money. With a chargeback, your bank takes action on your behalf to investigate the dispute without requiring merchant cooperation. This distinction is important because it means chargebacks carry more weight and consequence than standard customer service complaints.

Practical Takeaway: Before pursuing a chargeback, understand that this is a formal dispute process through your bank, not a casual refund request. It's more powerful than asking a merchant for your money back, but it also involves investigation and documentation requirements.

The Major Reasons Chargebacks Are Filed

Chargebacks fall into several broad categories based on why the cardholder initiated the dispute. The first major category is "card-not-present" fraud, where someone uses your card information without your permission to make purchases online or over the phone. The second is "card-present" fraud, where a thief uses a stolen physical card at a point-of-sale terminal. These two fraud categories represent the majority of chargeback cases, with fraudulent transactions accounting for roughly 36% of all chargebacks according to industry data.

Free Guide to Making Roux for Gravy →

The second major reason people file chargebacks involves "merchant error." This includes situations where a merchant charges your card twice for the same transaction, charges an amount different from what was agreed upon, or processes a transaction after you canceled an order. These unintentional errors happen regularly in retail and service businesses. For example, a restaurant might accidentally run your card twice, or an online store might charge shipping fees that weren't disclosed at checkout.

A third category is "services not rendered or goods not received." If you pay for a service that a merchant never provides, or you never receive merchandise you ordered, you have grounds for a chargeback. This category includes situations where a merchant goes out of business without delivering ordered items, provides services of significantly lower quality than promised, or simply disappears after taking payment. The e-commerce industry sees particular challenges in this area, with some online merchants operating fraudulently from the start.

Another important reason for chargebacks involves "unrecognized recurring billing." Many services operate on subscription or automatic renewal models. If a merchant doesn't clearly disclose that charges will recur, or if they continue charging after you've requested cancellation, you can dispute these recurring charges. The Federal Trade Commission has received thousands of complaints annually about unauthorized recurring charges from streaming services, membership programs, and subscription boxes.

The final major category includes disputes over "billing statement errors," where the cardholder claims the merchant provided incorrect information on the receipt or billing statement. This might involve incorrect pricing, discrepancies in the date of the transaction, or merchant name confusion that makes it hard for the cardholder to identify what they actually paid for.

Practical Takeaway: Identify which category your situation falls into before contacting your bank. Having clear reasoning strengthens your dispute and helps your bank's investigation move forward more efficiently. Keep records showing what should have happened versus what actually occurred.

Step-by-Step Overview of the Chargeback Process

The chargeback process begins when you contact your card issuer—your bank, credit card company, or financial institution—to report a disputed transaction. You typically do this through your online account, a mobile app, by phone, or in person at a branch. When you initiate contact, have the transaction details ready: the date of the charge, the merchant name, the amount, and a clear explanation of why you're disputing it. This initial report starts the formal investigation.

Free Guide to New Car Registration at the DMV →

Once you've reported the dispute, your bank enters a "retrieval request" phase where they contact the merchant asking for documentation about the transaction. The merchant has a set timeframe—usually 10 to 30 days depending on your card network—to respond with evidence supporting the charge. This evidence typically includes copies of the sales receipt, proof of delivery, or documentation showing you authorized the transaction. The merchant may also provide communications you had with them about the purchase.

During this period, your bank conducts an investigation into your claim. They review the evidence the merchant provides, consider your account history with similar transactions, and assess the credibility of your dispute. Many banks automatically credit your account during the investigation period, which typically lasts 10 to 45 days. This means you often regain access to the disputed funds while the investigation continues, though this is at your bank's discretion and not guaranteed.

After gathering all available information, your bank makes a determination about the dispute. If the bank determines your claim is valid, the chargeback is upheld and the merchant loses the funds permanently. If the merchant's evidence is compelling, the bank may rule against you and remove any provisional credit they provided. In some cases, disputes become especially complex, leading to a "pre-arbitration" or "arbitration" phase where the payment card network (Visa, Mastercard, American Express, or Discover) makes a final decision.

Throughout this process, timelines matter significantly. You typically have between 60 and 120 days from when you discover an unauthorized or problematic charge to initiate the dispute with your bank. Card networks set specific deadlines for merchants to respond with evidence. Missing these deadlines can result in automatic rulings in either direction.

Practical Takeaway: Document everything from the moment you notice the problem. Note the exact date you discovered the issue, preserve all communications with the merchant, and save any evidence like order confirmations, tracking numbers, or photos of products received. These details become critical during investigation.

Documentation You'll Need to Support Your Dispute

Your bank will request specific documentation to support your chargeback claim. For fraud-related disputes, you'll need to provide a detailed timeline of when you discovered the unauthorized transaction, proof that you didn't authorize the charge, and any evidence of how your card information may have been compromised. This might include statements showing where you were when the fraudulent charge occurred, or documentation that the merchant account was never set up by you. If your card was physically lost or stolen, a police report strengthens your claim.

Free Guide to CDL Training Program Funding Options →

For disputes involving non-receipt of merchandise or services, gather the original order confirmation, any emails exchanged with the merchant, tracking information showing whether delivery was attempted or completed, and communication proving you never received what you paid for. Screenshots of product pages showing what was promised are helpful. If the merchant sent the item to the wrong address, you need evidence showing you provided the correct address during checkout or that you notified the merchant of the error before filing the chargeback.

For service-related disputes, collect contracts or agreements outlining what the merchant promised, documentation showing they failed to deliver those services, and any correspondence where you asked them to correct the problem. If you paid a contractor for work that was never completed, before and after photos, emails requesting completion, and copies of your contract become essential evidence. For disputes involving billing errors, preserve your original receipt, the merchant's corrected receipt if they issued one, and any back-and-forth communications about the error.

If you're disputing recurring charges, gather documentation showing you canceled the subscription or membership. Many subscriptions require written cancellation requests, so emails or support tickets demonstrating this request are valuable. If the merchant claimed to send a confirmation of cancellation but continued billing, present that correspondence along with your bank statements showing continued charges. Screenshots