Kavra LabChargebacks, in plain terms
When a cardholder tells their bank a charge is wrong, the bank, called the issuer, can reverse it without the merchant's agreement. That is different from a refund, where the merchant chooses to return the money. In a chargeback the merchant loses the sale amount, pays a dispute fee to its processor, and often has already shipped the goods.
Every dispute gets a reason code from the card network. The codes fall into a few families: fraud (the cardholder says they did not make the payment), authorization problems, processing errors, and consumer disputes such as an item that never arrived or did not match its description.
How the chargeback process works
- 01
Dispute
The cardholder contacts their bank and disputes a charge. The bank may credit them provisionally right away.
- 02
Chargeback
The issuer sends the chargeback through the card network to the merchant's bank, the acquirer, which debits the merchant.
- 03
Representment
The merchant can fight back by sending evidence: delivery proof, login and device history, prior orders, customer messages.
- 04
Decision
The issuer reviews the evidence. If it is not enough, the chargeback stands. Some cases escalate to arbitration by the card network, with higher fees.
Why chargebacks matter beyond the lost sale
Card networks track each merchant's ratio of disputes to transactions and run monitoring programs for merchants whose ratio stays too high. Being placed in one means extra fees and remediation plans, and in the worst case the acquirer can close the merchant account. So a wave of fraudulent orders costs more than the goods: it threatens the ability to take cards at all.
Two sources drive most fraud-related chargebacks. The first is third-party fraud: a criminal uses a stolen card, through carding or after card testing, and the real owner disputes it. The second is friendly fraud: the real cardholder makes the purchase, then disputes it anyway.
Chargeback vs refund vs friendly fraud
| Who starts it | Merchant's role | |
|---|---|---|
| Refund | Customer asks the merchant | Merchant agrees and returns the money |
| Chargeback | Cardholder asks their bank | Money is pulled back, merchant can contest it |
| Friendly fraud | Real cardholder falsely disputes a valid purchase | Merchant must prove the purchase was genuine |
How to prevent fraud chargebacks
The cheapest chargeback is the fraudulent order you never accepted. Assess the buyer before payment, step up risky orders with 3-D Secure to shift liability, and keep a record of device and login evidence for every order so you can win the disputes you do get.
Kavra assesses each checkout in real time and returns an explained verdict: the real device, the network, links to other accounts and a recommendation to allow, verify or block. The same evidence, stored with the order, supports representment later. See payment fraud prevention for the full approach.