A chargeback is a dispute between a merchant and its customer (who paid by credit card). The customer or cardholder tries to claim that their purchase wasn’t fulfilled by the merchant, etc. and the merchant tries to prove that they did adequately render service by providing a receipt, signed agreement, recorded conversation, etc. The cardholder typically has anywhere from 45 to 180 days to submit a chargeback after the date of purchase or service rendered.
The chargeback process of who wins and who loses is essentially a mediation between the cardholder’s bank and the acquiring bank (as a processor, we partner with acquiring banks). When a chargeback is received by an issuing bank from one of their disgruntled cardholders, the funds are immediately debited from the merchant’s account by the acquiring bank and placed in the consumer’s respective account while the dispute is decided. This mediation process is governed by Visa/ MasterCard chargeback rules and regulations. If the Issuing Bank and Acquiring Bank can’t come to an agreement, the chargeback will go to arbitration where a Visa or MasterCard rep (depending on the card) will ultimately decide who wins. If the chargeback is deemed valid, the consumer retains the funds. If the chargeback is deemed as invalid, the funds are again debited from the consumer and re-deposited to the merchant’s account.