A chargeback is essentially a transaction reversal that's initiated by a credit card holder through their bank. This happens when the cardholder disputes a charge on their account, claiming something went wrong with the transaction.
Common Causes of Chargebacks
Chargebacks are triggered by a variety of issues, ranging from fraudulent transactions, where stolen card information is used, to customer dissatisfaction, such as receiving a damaged product or one that doesn't meet the advertised standards. Other common reasons include clerical errors like accidental double billing or incorrect transaction amounts, and procedural mistakes such as failing to issue a refund when promised.
Financial Impacts of Chargebacks
The financial repercussions of chargebacks for businesses extend beyond the immediate loss of sale revenue. Each chargeback incurs an administrative fee, and frequent chargebacks may lead to higher transaction fees or additional penalties from payment processors. Excessive chargeback rates can strain business relationships with financial institutions, potentially resulting in the termination of processing agreements.
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Author: Phillip Parker
Hello and thank you for visiting! I'm Phillip, the creator and author behind this website. My mission with CPO is to hold credit card processors accountable for their business practices by publishing my research on their policies, contracts, pricing, and client and employee satisfaction levels. The goal of this research is to provide a comprehensive guide on which companies you can trust with your card processing services and which ones you may want to reconsider. I have been publishing my findings since 2009, and my work has been recognized by national publications such as CNN, MSN, FOX, and INC Magazine, among many others.
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