What is a chargeback? A small business guide

A chargeback happens when a cardholder asks their bank to reverse a payment, instead of asking you for a refund directly. Their bank pulls the funds back from your account straightaway, then asks your payment provider to prove the transaction was legitimate. Until that's resolved, the money — plus a chargeback fee, typically £10–£25 — sits against your account, not theirs.

It exists to protect cardholders from fraud and from merchants who simply vanish. The trade-off is that it's also used, deliberately or not, by genuine customers who'd rather skip the refund conversation and go straight to their bank.

The most common reasons you'll see one

• Item not received — common with delayed deliveries or postal delays outside your control.
• Item not as described — the customer says what arrived didn't match the listing.
• Fraudulent transaction — the cardholder says they never made the purchase at all.
• Duplicate processing — you or your terminal charged the same card twice.
• Subscription not cancelled — increasingly common for recurring billing.

How the process actually runs

Once a cardholder raises a dispute, it moves through roughly the same stages regardless of provider:

1. Notification — your payment provider tells you a chargeback has been filed, usually with a reason code.
2. Funds withheld — the disputed amount is deducted from your account or held from your next payout immediately.
3. Evidence window — you typically have somewhere between 7 and 21 days to submit evidence, depending on your provider and the card scheme.
4. Decision — the card scheme (Visa, Mastercard, Amex) reviews the evidence and rules for you or the cardholder.
5. Re-presentment or write-off — if you win, funds are returned; if you lose, the chargeback and its fee stand.

What actually wins a dispute

Card schemes want proof, not explanation. The evidence that tends to carry weight:

• Proof of delivery with a signature or tracking confirmation to the billing address
• Records showing the customer used or accessed the product or service after the purchase date
• Correspondence where the customer confirms receipt, or doesn't dispute quality, before the chargeback
• Your terms and conditions, particularly around cancellations, shown to have been presented at checkout
• AVS (address verification) and CVV match results from the original transaction

The single biggest lever most small businesses are missing isn't better evidence — it's keeping the evidence in the first place. Export and file delivery confirmations, checkout logs and customer messages somewhere you can find them quickly, because the response window is short.

Reducing how often they happen

• Make your billing descriptor recognisable — a huge share of "fraudulent transaction" disputes are simply customers who didn't recognise your business name on their statement.
• Confirm orders clearly — an email with the order, price and delivery estimate heads off a lot of "item not received" disputes before they start.
• Make refunds easy to ask for — a visible, responsive returns process is usually faster and cheaper than fighting the chargeback that replaces it.
• Use 3D Secure where you can — for online sales, authenticated checkouts shift liability for certain fraud disputes back to the card issuer.