Elavon • Article • U.S. Payment Smart (January 2025)
3 min. Read

 

Cardholders and their card issuing bank initiate a chargeback dispute as a way to argue the validity of a card transaction and request reimbursement from the payment recipient. They often do this instead of first trying to resolve their issue with the involved merchant.

Chargebacks can affect any business that accepts credit or debit card payments. But the more vulnerable businesses often sell luxury goods or services, are subscription based, run eCommerce sites or offer digital products. 

 

When a chargeback dispute is valid

Chargeback disputes presented are often valid, such as unauthorized transactions, merchant errors, non-receipt of goods or services, or if a purchased item is not as described or defective. Another valid reason for a chargeback can include unauthorized transactions where the cardholder’s payment information was used fraudulently. The process is designed to be a form of cardholder protection within the acceptance and dispute rules established by the involved card brand. Further down in this newsletter, we offer tips that can help detour chargeback disputes. 

 

When a chargeback dispute may be fraud-based

Unfortunately, invalid chargebacks are increasingly common. These chargebacks involve a level of fraud ranging from unintentional—such as a customer not recognizing a business’s billing descriptor—to organized theft.

Generally, fraudulent chargebacks fall into four categories: friendly fraud, when a customer makes a legitimate purchase but later forgets or claims they didn’t authorize it; return fraud, where a customer alleges a defect that doesn’t exist when returning a product; digital goods fraud, which involve disputes for online courses, software licenses or other digital products; and subscription fraud, where a customer claims a recurring charge was unauthorized or previously canceled.

 

Terms defined

The dispute and response process is known as chargeback representment. It’s a tightly regulated process for fighting an invalid chargeback. Representment involves providing the card issuing bank and the involved card network with evidence that demonstrates a transaction was valid under the card brand rules and that the cardholder’s claim should be resolved in favor of the merchant that accepted the original card payment. Representment can help a business prevail on some chargeback losses. Learn more about the process in the next story. 

If you’re new to chargebacks or confused by some of the language, check out this list of common chargeback terms and definitions.* 

 

Who assess chargeback fees?

When a merchant receives a chargeback on a transaction, it is the acquiring bank or credit card network that assesses the chargeback fee. Although Elavon has no control over these fees, we can help support your case if you choose to argue a chargeback claim’s validity (more details on our support featured below).

 

* By selecting the included links, you will leave Elavon content and enter a third-party website. Elavon is not responsible for the content of, or products and services provided by these third parties, nor does it assure the system availability or accuracy of information contained in the sites. These websites are not controlled by Elavon. Please note that the third-party websites may have privacy and information security policies that differ from those of Elavon. These materials are general in nature and may not address all situations or card processing circumstances. All programs or offers may be discontinued, altered, or amended without notice. We accept relay calls.

 

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