What is a chargeback? Definition and full process explained

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As an online retailer, chargebacks are something you’ll need to understand and tackle on a regular basis.


And from our experience of providing POS finance to hundreds of eCommerce sites, we know they’re not always that straight forward.


In fact, the vast majority of businesses say cardholder abuse of the chargeback process is a major concern for them. 


But what is a chargeback, what’s the process behind it, what are the reasons why a debit card chargeback may be filed, and how is it different from a refund?


With the help of our partners at payment specialist Acquired.com, we’ve laid out this comprehensive guide to chargebacks – and what our two businesses are doing to help retailers deal with them. 


In this guide, we’ll explain:


– Exactly what chargebacks are


– How they work


– Why you might see chargeback requests


– How to dispute a request


– The differences between chargebacks and refunds

What is a chargeback?


A chargeback is when a customer contacts their bank to dispute a debit or credit card transaction. If the chargeback is approved, the payment is forcibly reversed and the cardholder is given their money back.


They are usually triggered when a customer has an issue with an order or a service that they’ve been charged for. That could mean anything from a damaged item to a fraudulent claim, or a payment processing error resulting in a transaction being duplicated.


Customers will be able to file a chargeback request with their bank if the transaction was made on a credit or debit card, but this doesn’t always mean that they’ll get their money back.


This is because the business has the right to defend the chargeback request if they disagree with the legitimacy of the claim.

What’s the chargeback process?


1. The chargeback is filed


Filing a chargeback request is the first step in the process. It’s conducted by the cardholder and delivered directly to their issuer, bypassing the business and their refund process.


In general, consumers have 120 days after their purchase to dispute a payment, but you may find that this period is extended to 365 days in certain circumstances.


2. The chargeback is reviewed by the issuer


Once the request is submitted, it is reviewed by the issuer who then assigns a case code and begins the formal chargeback process.


When the process is complete, the card scheme will receive the chargeback and forward it to the acquirer, who then debits the funds from the business’ account.


3. The business reviews the case


This is when the business comes into play. If it decides it would like to challenge the chargeback, it’ll then need to create a defence document detailing the reasoning.


Once notified, our partners at Acquired.com will upload the dispute details to the Hub, allowing the business to review the transaction details. The business then needs to decide if it would like to challenge the chargeback. If so, it’ll then need to create a defence document that details this rebuttal.


The business would then use the Acquired.com Hub to submit its defence case within 10 calendar days, to then be passed from your acquirer to the issuer.


4. The issuer reviews the defence document


Once submitted, the defence document will be reviewed by the issuer and they will decide whether to accept or reject the defence based on the evidence given.


In instances where the defence is successful, the acquirer will then return the claimed funds to the business.


5. Taking further action if necessary


If the defence is rejected, there are three options for businesses:


– Filing an Arbitration case


– Continue to rebuttal with the cardholder, away from the card schemes


– Settle the issue and return the funds to the customer


In most instances, our partners at Acquired recommend that an Arbitration is not pursued as this can lead to additional fees that may outweigh the total value of the order that is being disputed.

Reasons why a debit card chargeback request may be filed


There are a few reasons why chargeback requests may be filed, and it is vital to understand why you’re receiving these payment disputes to see if there are any recurring themes.


If it’s the same product causing issues consistently, you may need to take a look at the quality of that product, the description that you’ve provided on your website, the service you are providing, and even the courier service that you’re utilising.


If any of these components of your service are below par, this could well be the reason that you’re receiving an increased number of chargebacks.




You may see the highest percentage of disputes relating to fraudulent activity.


Many fraudsters target businesses in the hope that they’re too busy or ill-prepared to deal with fraudulent chargeback attempts, with those unprepared businesses often falling victim and being forced to return funds for fraudulent purchases.


Contact the team at Acquired.com, who help customers to minimise successful fraud attempts with authentication tools like 3D Secure V2. 


Processing errors


From time to time, there may be processing errors on the business’ side that result in a chargeback being raised.


Examples of these errors issues include:


– Incorrect order amount being charged


– Duplicate transactions


Consumer disputes


Another major cause for chargebacks can be customer disputes that arise when they find fault in their order. These disputes can include anything from damaged items to late deliveries, cancelled services or other service-based disputes.


In instances where a customer dispute is the reason for the chargeback request, the business may be able to successfully challenge the filed claim if they have evidence that the product was delivered or service carried out as agreed.


Disputing a chargeback

Before taking any action, our partners at Acquired always recommend businesses carry out an investigation into the dispute to understand the reasons behind the claim – and then make a judgement on whether the chargeback should be rejected based on what they find.

Acquired’s main goal is to protect businesses and minimise the excess fees incurred during the process.

In most instances, they recommend disputing a chargeback if you believe that the transaction is legitimate and free of errors.

They recommend further investigation into a dispute in instances where the following points are applicable:

– You are unable to decipher whether the transaction in question is fraudulent or not

– The transaction is not of a significant enough value to warrant paying any further dispute fees


How is a chargeback different from a refund?


Refunds and chargebacks are very different processes for businesses to be aware of – despite having a similar ultimate result.

The biggest difference between chargebacks and refunds is that a refund is requested by the customer directly to the business and will be handled in line with the business’ refund policy.

Businesses can reject a refund request if they believe that their service or product does meet the described standard – if a resolution cannot be found between the business and the customer within the refund process, a chargeback request may be issued.

With a chargeback on credit card, for example, the request goes straight to the bank rather than the business. Unlike a refund, a chargeback isn’t just a single event. The process can be lengthy, going back and forth between all parties until resolved.

If a chargeback is successful, the business fees associated are much higher than they would be with a refund. A high number of chargebacks can also be seen as a red flag to many banks and payment providers, so it’s important that your number of chargeback claims don’t get out of control.

Tackling chargebacks with DivideBuy and Acquired.com

Our team at DivideBuy provides businesses with industry-leading payment processing infrastructure as part of our Point of Sale finance solution. But it’s important to acknowledge that sometimes, things can go wrong, meaning there is a need for a chargeback. 

Together with our partners at Acquired.com, we’ll always be on hand to provide expert advice for when you need to tackle these problems head on.

For more information about chargebacks and how we’re supporting our merchant partners, book a demo with us now.

Book a Demo

Please note, a minimum turnover of £2.5M and minimum trading period of 24 months is required to offer DivideBuy finance solutions.

Please note, a minimum turnover of £2.5M and minimum trading of 24 months is required to work with DivideBuy.


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