Getting paid
Chargeback
A chargeback is a forced reversal of a card payment, initiated by the cardholder’s bank, that returns the funds to the customer and pulls them back from the merchant.
How chargebacks work
A chargeback happens when a customer disputes a card charge with their bank instead of asking the merchant for a refund. If the bank sides with the cardholder, it reverses the transaction, removing the money from the merchant’s account — often plus a chargeback fee.
Chargebacks exist to protect cardholders from fraud and billing errors, but they can be costly and time-consuming for businesses, especially when used for issues that a refund could have solved.
Preventing chargebacks
Most non-fraud chargebacks come down to confusion. Clear invoices, a recognizable business name on statements, prompt customer support, and an easy refund path all reduce disputes before they reach the bank.
Keeping records — signed agreements, delivery confirmation, and detailed invoices — also helps you win the dispute if a chargeback is filed, since you can show the charge was legitimate.
Example: A client forgets they hired you, sees an unfamiliar charge, and files a dispute. The bank issues a chargeback, reversing the payment, until you provide the signed agreement and invoice proving the charge was valid.
FAQs
Frequently asked questions
What’s the difference between a chargeback and a refund?
A refund is when the merchant voluntarily returns money to the customer. A chargeback is a forced reversal initiated through the customer’s bank, often with an added fee to the merchant.
How can I avoid chargebacks?
Use clear invoices and a recognizable billing name, respond quickly to customer questions, offer easy refunds, and keep records (agreements, delivery proof) to contest disputes.
Related terms
Invoice payment
An invoice payment is the funds a buyer sends to a seller to settle the amount owed on an invoice, by or before its due date.
ACH payment
An ACH payment is an electronic bank-to-bank transfer processed through the US Automated Clearing House network, commonly used to pay invoices and run payroll.
Past-due invoice
A past-due invoice is an invoice that has not been paid by its due date, making the balance overdue.
Put it into practice
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