A chargeback is the reversal of a credit or debit card transaction initiated by a cardholder’s bank or card issuer (such as Visa, MasterCard, Discover, or American Express) when a customer disputes a charge. If the dispute is resolved in favor of the customer, the funds are returned to their account, and the merchant may lose the sale amount, as well as incur additional fees.
The main difference between a chargeback and a refund is who initiates the process. In the case of a refund, the merchant directly returns the funds to the customer following a product return, exchange, or dissatisfaction with a service. In contrast, with a chargeback, the customer receives credit from their card issuer.
The most common reasons for a chargeback include:
- Cardholder does not recognize the transaction.
- Cardholder did not authorize the charge (may be fraudulent).
- Processing errors were made during the transaction (e.g., duplicate processing).
- The product or service was not received, or the quality was not as expected.
Retrieval Request
If the cardholder questions a transaction on the billing statement, they will contact the issuer to request the documentation of the original transaction. The issuer will send the retrieval request to the acquirer, and the acquirer forwards it to the merchant. The merchant should respond to the retrieval request within the designated time frame to minimize the potential chargeback by providing all of the following:
- A transaction sales slip
- An invoice
- Proof of delivery of goods and services
- Any documentation related to the purchase, including correspondence with the cardholder
Chargeback Notification
Once a chargeback is filed by the cardholder or the issuer, a debit to return the funds is issued to the university’s bank account for the chargeback amount. Upon receiving the alert from the acquirer, the Merchant Services department will forward the email notification to the impacted merchant(s) and ask for immediate action. The debit is held by the issuer until the outcome of the merchant’s or cardholder’s response to the chargeback has been determined.
Accept Chargeback
If the chargeback is valid, and the cardholder is entitled to the credit, the merchant shall respond to the chargeback by accepting it within the designated time frame provided in the notification (15 days for Visa/Mastercard/Discover; 20 days for AMEX). The disputed amount will be permanently debited to the merchant’s revenue PTA.
Dispute Chargeback
If the original transaction is valid, the merchant can dispute a chargeback within the designated time frame by submitting a response to substantiate the charge along with the appropriate documentation, such as:
- Original sales slip
- Invoice
- Proof of delivery of goods or services
- A copy of the refund policy for nonrefundable fee
- Indication of whether the item was an in-person, telephone or internet transaction
- Proof of refund issued to the card
- Name and address match (for internet transactions)
The merchant will receive a chargeback reversal notification that restores the funds being held back to the merchant after successfully disputing the chargeback. However, if the dispute was ruled in favor of the customer, there will be reversal rejection, and the chargeback amount will be permanently debited to the merchant’s revenue PTA.
Impact of No Action
There is no option for the merchant to "turn off" the ability to dispute. If the merchant fails to respond to a chargeback (either to accept or reject) within the mandated time frame, then the disputed amount will be permanently debited to the merchant’s PTA, along with an additional non-refundable processing fee of $10 for the first chargeback and may increase on subsequent chargebacks on the same transaction. To avoid this financial impact, all merchants should submit a support request to Merchant Services to sign up for Commerce Control Center Business Track and/or American Express online portals (below) to manage their chargebacks in a timely manner.
The key to preventing chargebacks is to follow best practices when setting up the merchant account, processing transactions and maintaining sales records, including:
- Ensure the merchant business name that appears on the cardholder's statement is recognizable.
- Always provide a telephone number for merchant contact.
- Respond promptly to retrieval requests from the cardholder or issuer for copies of sales transactions.
- If the card is declined when dipped/swiped/tapped through a point of sale terminal, do not continue to try and get an authorization. Instead request a new form of payment from the cardholder.
- Disclose the refund/cancellation policy at the time of the transaction.
Stripe may alert the merchant with pre-dispute notifications before an actual dispute is filed. Pay attention to these notifications because:
- A dispute could be avoided entirely with proactive customer service and transaction clarification.
- Failure to respond in the pre-dispute phase can have negative implications in the formal dispute phase.
When a customer disputes a charge to their account, Stripe:
- Notifies the merchant of the dispute through the Stripe Dashboard, email, webhooks, and the API.
- Debits the disputed amount, plus a dispute fee, from the Stripe account. The dispute fees for your country can be found on Stripe’s Pricing page.
- Provides the merchant with an explanation of the dispute and access to the customer’s claim to their bank.
- Walks the merchant through the process of submitting convincing evidence to counter the dispute.
Use the Stripe Dashboard or API to submit the response. Throughout the chargeback process, Stripe facilitates, but doesn’t have influence over the outcome, which is at the sole discretion of the customer’s bank. Learn more about how disputes work through Stripe.
Dispute Manager – Commerce Control Center
Dispute Manager is an online tool within the Commerce Control Center (formerly Business Track) platform that allows merchants to manage payment disputes and chargebacks across multiple card networks, including Visa and Mastercard. It offers a centralized view of chargebacks and retrievals, facilitates the quick submission of supporting documents, and helps merchants meet dispute response deadlines—all within a single platform.
Dispute Module - American Express Merchant Portal
The Dispute Module in the American Express Merchant Portal is an online tool that helps merchants manage chargebacks efficiently. It provides a centralized interface to view disputes, submit responses, upload supporting documents, and track outcomes. The module streamlines the chargeback process, enabling faster resolution and helping merchants minimize potential revenue loss.
