A chargeback is the forced reversal of a card transaction, initiated when a cardholder disputes a charge with their issuing bank rather than requesting a refund from the merchant. The issuer pulls the funds back through the card network, and the merchant must either accept the loss or contest it with evidence through representment.
Why it matters
Each chargeback costs far more than the transaction: a fee from the acquirer, the lost goods or service, and a mark against your chargeback ratio, which the networks monitor under programs like VAMP and Mastercard’s Excessive Chargeback Program. For high risk merchants the ratio is existential. Accounts are terminated not because chargebacks cost money but because too many of them put the acquirer inside a network monitoring program. Prevention, deflection and disciplined fighting are three different practices, and mature merchants run all three.