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What is a chargeback?

Chargebacks are transactions that are disputed by the cardholder or the cardholder’s card issuing institution. A chargeback occurs when a cardholder disputes a charge or when proper card acceptance and authorization procedures were not followed. When a merchant receives a chargeback, its deposit account is debited for the indicated amount. In addition to the chargeback, the merchant may incur a fee if he failed to follow card acceptance and authorization procedures. Reasons for chargebacks include a cardholder dispute or an error in handling on the part of a merchant’s staff. Obtaining proper authorization and adhering to correct processing procedures can minimize chargebacks.