Chargeback.
In plain English
A chargeback happens when a customer contacts their own bank or card company to dispute a charge instead of asking you for a refund. The bank reverses the payment, takes the money back out of your account, and usually adds a fee on top. Chargebacks exist to protect cardholders from fraud and broken promises, but they can also be misused by buyers who simply forgot a purchase or changed their mind. As the seller, you can fight a chargeback by sending the bank proof the charge was legitimate, but you do not always win.
01Why it matters
A chargeback can cost you the sale, the product you already shipped, and a penalty fee all at once, and too many of them can get your ability to accept cards shut off entirely.
02The math, step by step
A customer pays you $120 for a service, then disputes it with their bank weeks later. The bank reverses the $120 and your processor adds a chargeback fee, which is set by your processor, so check its pricing. You are now out the sale plus that fee plus your time, unless you submit records, like a signed agreement or delivery proof, and the bank rules in your favor.
03What this is NOT
A refund is money you give back voluntarily, directly to the customer, on your own terms. A chargeback is forced on you by the customer's bank, often comes with a fee, and counts against your account standing. A polite refund is almost always cheaper than a chargeback.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.
Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice