How Credit Card Chargebacks are Handled: Learn about Credit Card Dispute with a Merchant

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What Is a Credit Card Chargeback?

A credit card chargeback occurs after a cardholder initiates a merchant dispute with their issuing bank, the issuing bank then will charge back the transaction(s) being disputed to the merchant and the cardholder is credited for the disputed transaction(s). Credit card chargebacks are initiated by the issuing bank and can only be processed after an investigation of the disputed transaction(s) occurs. Merchant disputes can take a day or two before a chargeback is initiated or they can take several weeks if extensive research is required.

The main issue with credit card chargebacks is that the issuing bank typically only has two attempts to charge a transaction back to a merchant. There is a first “presentment” or chargeback of the case with details gathered from the cardholder that is sent to the merchant’s bank, the acquiring bank, for review with the merchant. If the merchant contests the credit card chargeback, they will present documentation validating their side of the dispute. The issuing bank then presents this information to the cardholder giving them one more chance to present a stronger case for their dispute, if available. If a second credit card chargeback is processed and the merchant still contests it then the chargeback process is finished. With only two shots for a cardholder to regain their money back for a disputed transaction, what steps can cardholders take during a transaction to prepare them in the event they find themselves disputing the charge?

Documentation Is the Key

The good and bad news about “covering your assets” in regards to credit card transactions lies with retaining documentation. Whether you make a purchase on-line, over the telephone, or in person there are two important details about a transaction you must make yourself acquainted with: the nature of the transaction and the merchant’s cancellation/return policy.

The first line of defense with any credit card transaction is to know the nature of it. Read the terms and conditions of any purchase made. This is important because some transactions are an introductory or enrollment into a program that will charge your credit card on a recurring basis. It is not always the merchant’s responsibility to advise of these types of transactions in an upfront manner, sometimes these terms of sale are hidden.

The second line of defense is to be acquainted with the merchant’s cancellation and return policy. If you purchase a product that is in good working condition however, you then decide you no longer want it and take it back to the store for a refund, you expect to get your money back. This is not always the case. The merchant may very well have a no return policy and with this type of policy they are under no obligation to accept the return and give you a refund. The same goes for canceling a transaction, if the merchant has a no cancel policy, you will still receive the merchandise or service regardless if you no longer want it.

It is prudent for you as the cardholder to retain documentation pertaining to the terms of sale and the merchant’s cancellation/return policies. This documentation will help you if you have adhered to the merchant’s terms of sale and policies for a disputed transaction. However, documentation about the terms of sale and merchant cancellation/return policy are not the only document you should keep.

Documentation Needed for Certain Types of Disputes

If you cancel a transaction adhering to the merchant’s cancellation policy, yet the merchant has failed to issue a credit card chargeback, you will need to retain the following documentation to build a strong case should you initiate a dispute:

  • Merchant’s cancellation/return policy at the time of your sale.
  • Confirmation of your cancellation – confirmation code, letter, email from merchant, or receipt showing credit is due.
  • Proof of your return – tracking history, signed delivery confirmation, or merchant written acknowledgement your return was received

You can dispute a transaction the represents delivered merchandise that is damaged or does not adhere to the product’s written description. For example, if you receive a computer that is supposed to have a 300GB hard drive but the unit you received only has a 150GB hard drive this evidently is not what was ordered. You wish to return it because the unit received is not the unit that was described at the time of your transaction. You should have the following documents on hand if you need to dispute the transaction:

  • A copy of the invoice with the product description clearly written or product item number and a product description that matches the product item number on the receipt/invoice.
  • A picture of the product received – to show how it is not as described or to show how it was damaged or defective.
  • Proof of your return

Build Your Arsenal

In any type of dispute, you as the cardholder must have a signed statement of the details of your dispute before a credit card chargeback can be initiated. You are the one seeking the dispute and a return of your funds; therefore, you must provide a signed statement with the details about the nature of your dispute. Your signed statement along with corroborating documentation are your arsenal that will build a strong dispute case for you so that your issuing bank can process a credit card chargeback. Be aware of what your transaction represents, know the merchant’s return/cancellation policies, and have documentation to back up your claim. The success of your chargeback depends on it.


  1. Visa Chargeback cycle -
  2. Visa International Operating Regulations and Dispute Rules - PDF
  3. Matercard Chargeback Guide - PDF