Glossary
A card payment reversed by the cardholder's bank after a dispute.
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A card payment reversed by the cardholder's bank after a dispute.
When a customer disputes a charge, the amount is pulled back from the merchant while the dispute is reviewed. Fees usually apply even if the merchant wins.
High chargebacks reduce deposits and can trigger processor reserves that tie up cash.
A $600 sale disputed as unauthorized is withdrawn from settlement, plus a dispute fee, until resolved.
Retailers, online sellers and service businesses all see chargebacks. Processors can hold reserves if the rate climbs.
A reviewer may notice chargeback debits on statements or processor reports. A low, stable rate is normal; a rising one prompts questions about product, delivery or fraud controls.
Owners often think a chargeback only costs the sale. The dispute fee, staff time and the risk of a processor reserve make the real cost higher.
Most chargebacks come from three sources: customers who do not recognise the charge, goods or services that did not arrive as expected and genuine fraud. A clear billing descriptor that matches your business name, written delivery confirmations and a simple refund policy posted where customers see it prevent most of the first two.
For the third, use chip and tap at the counter wherever possible, verify address and security code online and keep records of signatures or delivery photos for large orders. When a dispute arrives, respond within the processor's deadline with evidence; an unanswered dispute is usually lost automatically.
In Canadian dollars, a business doing $40,000 a month in card sales with a 0.3% dispute rate sees about $120 reversed monthly plus fees. At 1.5% it is $600 plus fees and the risk of a reserve. Tracking the rate monthly is the easiest early warning.
An Edmonton online supplement seller sees disputes climb after changing its billing descriptor to a parent-company name customers do not recognise. Switching back to the brand name and sending a shipping confirmation email with tracking cuts disputes by more than half within two months. The fix cost nothing; ignoring it could have triggered a processor reserve that held back thousands of dollars of sales.
Key takeaway: A recognisable billing name, delivery proof and quick responses to disputes prevent most chargebacks at no cost.
They reduce net deposits and can raise questions if frequent.
See the related guides and the comparison pages, or apply and ask.
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Educational information only. It is not legal, tax or accounting advice.
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