Payments glossary
Chargeback
A chargeback is a forced reversal of a card payment raised through the customer's issuing bank - for fraud, non-delivery or billing errors. The funds are pulled back from the merchant, who may contest the dispute with evidence through a process called representment.
How a chargeback unfolds
A cardholder disputes a charge with their issuing bank - it was fraudulent, the goods never arrived, the amount was wrong. The issuer raises a chargeback through the card scheme, the disputed funds are debited from the merchant via the acquirer, and the merchant chooses: accept the loss, or fight the case through representment with evidence. Every chargeback carries a reason code that defines what evidence would win.
Why a chargeback costs more than the transaction
The reversed sale is only the visible cost. Each case adds an administration fee, and - more dangerously - a mark on the merchant's chargeback ratio, which the card schemes monitor. Merchants whose disputed share of transactions climbs too high enter scheme monitoring programmes with escalating fines, and acquirers can impose reserves or terminate processing entirely. Chargebacks are a business-continuity metric, not just a leak.
Prevention beats representment
The strongest defences run before the payment: 3-D Secure authentication, which moves fraud liability to the issuer; a billing descriptor customers recognise on their statement; tracked delivery; and fast, visible customer service, because a customer who cannot reach you calls their bank instead. LekkaPay's gateway applies 3-D Secure and risk screening to card payments as standard, cutting off the fraud disputes that make up the bulk of most merchants' chargebacks.
Frequently asked questions
How long can a customer raise a chargeback after paying?
Scheme rules commonly allow around 120 days, measured from the transaction date or, for goods and services delivered later, from the expected delivery date. Practically, a card payment can come back months after the money settled - which is why providers hold reserves on higher-risk merchants.
What is the difference between a chargeback and a refund?
A refund is voluntary: the merchant returns the money and the matter ends. A chargeback is forced through the customer's issuing bank, carries a fee, counts against the merchant's chargeback ratio, and can only be contested through representment. A prompt refund is almost always cheaper than the chargeback it prevents.
How do merchants reduce chargebacks?
Authenticate online card payments with 3-D Secure, which shifts fraud liability to the issuer; use a billing descriptor customers recognise; ship with tracked delivery; answer customer contact quickly; and refund fast when something has genuinely gone wrong.
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