A chargeback is when funds are returned to the purchaser, and is issued by the bank of the person purchasing. A chargeback requires the purchaser to initiate the chargeback through contacting their bank which will require the party reporting the chargeback to file the complaint.

A chargeback acts as the purchasers last resort to merchants which are unable to fully deliver the customers transaction to their satisfaction. Merchants in turn, have an extra incentive to deliver the consumers product or service with the threat of a chargeback. Chargebacks also allow the possibility of reversing the transfer of funds if the transaction is deemed unlawful, for instance: the transfer of funds is performed through the theft of identity.

Chargebacks can happen for several reasons, where each chargeback requires the purchaser issueing the chargeback to select a “reason code”.  Reason codes may vary in different banking networks, although all chargebacks can be issued in one of the four main categories:

Technical chargeback – Clerical chargeback -Quality chargeback – Fraud chargeback