Definition
Chargeback
A chargeback is the reversal of a card or digital payment initiated by the customer's bank, typically for fraud, non-delivery or a disputed transaction, returning funds to the customer.
A chargeback lets a cardholder dispute a transaction through their issuing bank, which can claw back the amount from the merchant's acquiring bank if the dispute is valid — for fraud, goods not received, duplicate charges or defective service.
The process involves evidence from both sides and follows card-network rules and timelines. For merchants, frequent chargebacks raise costs and risk, so they maintain documentation and fraud controls.
Chargebacks are a key consumer-protection mechanism for card payments. UPI and other rails have their own dispute-resolution processes rather than card-style chargebacks.
Related terms
- Payment Gateway (PG)A payment gateway is the technology layer that securely transmits a customer's payment details from a merchant's checkout to the banks and networks that authorise the transaction.
- Tokenisation of CardsCard tokenisation replaces your actual card number stored by merchants with a unique, device- or merchant-specific token, so real card details are never saved or exposed online.
- Virtual CardA virtual card is a digitally generated card number, linked to your real card or account, used for online payments to limit exposure of your primary card details.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.