What is a Chargeback?

A credit back to a cardholder's account, which occurs when a cardholder informs their credit card issuer, acquiring bank, or the processor that a particular charge was not authorized or that goods or services were not delivered or provided as promised. If a customer alleges the goods or services paid for were not delivered or provided as expected, then the merchant has seven days on average to produce evidence proving the goods or services were delivered or provided or that the cardholder's account was credited. A high chargeback history can often times result in a credit card processor holding funds to offset the risk of chargebacks. This is commonly known as a reserve, rolling reserve or reserve account. In extreme cases, excessive chargebacks can result in having the merchant's processing account closed. Excessive is usually considered to be over 1% by a standard Processor using a domestic banks and 2.5% if an account is placed with an international bank. Typical charge back fees range from $25 to $40 per chargeback.