Chargeback: Meaning, what’s the purpose & how to file?

Chargeback meaning

The chargeback meaning refers to the process where a customer disputes a charge with their financial institution to reverse a transaction. This typically happens when a transaction is incorrect, fraudulent, or not authorised. It serves as a consumer protection mechanism for resolving payment-related issues.

As per network guidelines, before initiating a chargeback request, it is mandatory for the customer to first approach the merchant and attempt to resolve the dispute. Further, the chargeback form requires the issuer to capture the details of the customer's attempt to resolve the dispute with the merchant. It also requires the issuer to record the reason if the customer did not contact the merchant before raising the chargeback request.

The bank then reviews the request and begins the chargeback processing procedure. This ensures that the dispute is handled through a structured and secure process.

How to file a chargeback (step-by-step)

1. Identify the transaction you want to dispute.

2. Contact your bank’s customer service team.

3. Provide transaction details and supporting documents.

4. Submit a request to file a chargeback.

5. Wait for the bank to review and process the claim.

6. Track updates until the chargeback is resolved.

What happens after a chargeback is filed?

Once you file a chargeback, the bank begins reviewing the request. Depending on the nature of the dispute and applicable card network rules, a temporary credit may be provided while the claim is being reviewed. This provisional credit is subject to final approval after the investigation is completed.

The merchant is notified and asked to provide supporting evidence. The merchant's acquiring bank reviews the merchant's response and communicates the chargeback acceptance or rejection outcome through the applicable dispute-resolution process. The entire process ensures fair evaluation for both the customer and the merchant.

Can a chargeback be reversed or rejected?

Yes, a chargeback can be reversed or rejected depending on the investigation outcome. If the merchant provides valid proof, the chargeback may be declined. The decision is based on transaction details and supporting evidence submitted by both parties.

Similarly, if the bank finds insufficient evidence from the customer, the request may not be approved. This is why proper documentation is important when disputing a charge. Timely submission of accurate documents can improve the chances of a successful claim.

Frequently Asked Questions

1. Is a chargeback bad for my credit score?

No, filing a chargeback does not directly affect your credit score. However, it is important to raise genuine disputes and avoid misuse of the process.

2. What documents are required for a chargeback?

Documents are required based on the nature of the dispute. For example, proof of an alternate mode of payment is required when the customer claims that the transaction was paid by other means. Similarly, complete information, including a detailed description of the goods/services ordered and the goods/services received, is required to investigate disputes related to Defective Merchandise or Goods/Services Not as Described.
Therefore, the documentary requirements may vary depending on the nature of the complaint reported by the customer.

3. What is an example of chargeback?

If goods or services are not delivered and the matter remains unresolved after attempting resolution with the merchant, you may be eligible to raise a chargeback request, subject to applicable card network rules and supporting documentation. Chargebacks are applicable only for unsecured transactions as per network guidelines.

4. Is there a chargeback fee?

Any applicable charges, if any, will be governed by the terms and conditions of the card issuer. Customers should refer to the applicable schedule of charges for details. It is advisable to check your bank’s terms and conditions before initiating a request.