What is a Chargeback?

A chargeback is the process of a customer disputing a payment transaction with their bank or card issuer, effectively reversing the transaction and getting their money back from the merchant.

There are three main types of chargebacks: 

• Fraudulent
• Authorisation 

• Processing Errors

   

Fraudulent Chargebacks (“I didn’t authorize this”)

• What it means: The cardholder claims they didn’t make or authorize the transaction.
• Common causes:
  • True fraud: Card stolen and used without permission.
  • Friendly fraud: Cardholder (or someone they know) made the purchase but later disputes it to avoid paying.

• Example:
  Someone steals Jane’s credit card number and buys electronics online. Jane notices the charge and reports it to her bank.

   

Authorisation Chargebacks (“You shouldn’t have charged me”)

• What it means: The transaction was not properly authorized, or authorization rules were broken.
• Common causes:
  • No valid authorization obtained before charging.
  • Merchant charged after authorization expired.
  • Duplicate charges.
• Example:
  A customer is charged twice for the same purchase because the payment terminal sent the transaction twice.
  
   

Processing Error Chargebacks (“Something went wrong with the payment”)

• What it means: A mistake occurred during transaction processing.
• Common causes:
  • Incorrect transaction amount processed.
  • Refund issued but not processed correctly.
  • Technical or system errors causing incorrect charges.
• Example:
  Merchant refunds a customer, but the processor fails to send the refund through, so the customer disputes the charge.