What happens when a customer disputes a credit card charge:
1. The customer files a dispute.
Once the customer sees a charge on their account statement that they believe to be fraudulent, they file a dispute against the charge with the bank or financial institution that issued the credit card used for the purchase (aka, the issuing bank).
2. The issuing bank initiates the chargeback.
When the customer disputes a charge, the issuing bank then begins the chargeback process.
3. The business has the chance to refute the chargeback.
As soon as a customer requests a chargeback, their bank will reach out to the business’s bank and give them a heads-up that the chargeback has been requested. At this point, the business has the opportunity to provide any evidence that refutes the customer’s claim that the charge is illegitimate.
4. The bank makes a decision.
The issuing bank will review evidence on both sides of the chargeback dispute and render a decision about whether to proceed. At this point, if the business declined to provide any evidence to support the charge’s validity, the issuing bank generally will approve the customer’s request for a chargeback.
5. If the issuing bank rules in the business’s favor...
If the cardholder’s bank decides the charge was valid and declines to proceed with the chargeback, then the funds are not returned to the customer. If the issuer had already credited the cardholder’s account for the disputed amount before the charge was investigated, and the charge is then found to be valid, those funds or credit will be removed again from the cardholder’s account.
6. If the issuing bank rules in the customer’s favor...
If the bank determines that the customer has legitimate grounds to request the chargeback, the funds are withdrawn from the business’s account and credited back to the customer.
7. Arbitration may follow the decision.
If the bank decides in favor of the business, and the customer still wants to fight for the chargeback, the customer has the option of pursuing arbitration. This takes the issue to the credit card company itself. It’s effectively an appeals process for the issuing bank’s decision. The credit card companies—Visa, American Express, Mastercard, Discover, etc.—have the final word in a chargeback dispute.
Learn more about chargebacks from Stripe.
