A chargeback is a payment reversal initiated by the cardholder''s bank rather than by you. The customer disputes a charge, their bank pulls the money back from your account, and you are charged a fee for the privilege — whether or not you eventually win.
How the process runs
- The customer disputes the charge
They contact their bank, not you. Often the first you hear of it is the reversal itself.
- The issuing bank reverses the payment
Provisionally, and usually immediately. The funds leave your account before anything is decided.
- You are notified and given a window
Typically 7–30 days to respond with evidence, depending on the network and reason code.
- You submit representment, or accept it
Evidence might include delivery confirmation, usage logs, your terms, and the customer communication history.
- The issuer decides
If you win, the money returns — usually without the dispute fee. If you lose, it stays reversed.
Chargeback versus refund
| Refund | Chargeback | |
|---|---|---|
| Who initiates | You | The customer''s bank |
| Sale amount | Returned | Reversed |
| Processing fee | Usually not returned | Usually not returned |
| Extra fee | None | $15–$25 typically; Paydude charges $12 |
| Counts against your ratio | No | Yes |
| Customer relationship | Recoverable | Generally over |
That table is the argument for making cancellation and refunds easy. A refund is a bad outcome; a chargeback is a worse one that also damages a metric you cannot afford to lose.
The threshold that really matters
What actually reduces them
- A recognisable billing descriptor. A large share of disputes are simply customers not recognising the charge — see what is a descriptor.
- Renewal reminders, especially before an annual charge that is easy to forget.
- Frictionless cancellation. Every cancellation you make hard becomes a dispute you cannot win.
- Fast support. The customer should find it easier to contact you than their bank.
- Delivery evidence. Tracking numbers and usage logs are what win representment.
To see what a single dispute costs in terms of the clean sales needed to recover it, use the chargeback cost calculator.
GOOD QUESTIONS
Frequently asked
What is the difference between a chargeback and a refund?+
A refund is you returning the money voluntarily. A chargeback is the customer's bank taking it back by force. A refund costs you the sale and usually the processing fee; a chargeback costs those plus a dispute fee and counts against your chargeback ratio.
How long does a customer have to file a chargeback?+
Typically 120 days from the transaction or from the expected delivery date, though it varies by network and reason code and can extend to 540 days in some circumstances. It is far longer than most merchants assume.
What chargeback rate is too high?+
Card networks place merchants into monitoring programmes at around 0.9% of transactions. The consequences — extra fees, mandatory remediation, reserves and in serious cases losing card acceptance entirely — cost far more than the individual disputes.
Can I win a chargeback?+
Yes, by submitting representment evidence: delivery confirmation, the signed authorisation, your terms, usage logs, and communication history. Win rates vary hugely by reason code — non-delivery claims are winnable with tracking, while genuine fraud rarely is.