One of the worst feelings for a small business owner is to see an unexpected withdrawal from your bank account. Unfortunately, this is often how a business owner first finds out about a card holder dispute, AKA a chargeback.

What is a Chargeback?

A credit card chargeback is a transaction reversal that occurs when a credit card issuer reverses a transaction, moving the funds from the merchant’s account back to the cardholder’s account.

This typically happens when a cardholder disputes a charge, claiming that the transaction was unauthorized, fraudulent, or that the goods or services paid for were not received or were not as described.

Key points about chargebacks:

  1. Dispute Process: The cardholder initiates a dispute with their credit card issuer.
  2. Investigation: The issuer investigates the claim, which may involve contacting the merchant for their side of the story.
  3. Resolution: Based on the investigation, the issuer decides whether to reverse the transaction or deny the chargeback request.
  4. Merchant Impact: If the chargeback is approved, the merchant loses the sale amount and may also incur additional fees and penalties. Too many chargebacks can damage a merchant’s reputation and result in higher processing fees or even termination of their merchant account.

Chargebacks are intended to protect consumers from fraudulent or poor-quality transactions, but they can also be abused by unreasonable customers who take advantage of the process.


How to Fight a Chargeback

A written customer service & refund policy is crucial for any small business. Your customer should have a clear understanding of how you will correct anything that goes wrong while they are doing business with you. You will need to provide this policy during the chargeback process.

If an unhappy customer is threatening a chargeback, there are several steps that a business owner can take to deescalate the situation.


  1. Recognize the customer is upset and apologize.
  2. Make sure their concern is fully understood and documented.
  3. Tell them verbally and in writing how you plan to correct the situation.
  4. Maintain good records of all communication.


Who Decides the Outcome?

Ultimately, the card holders bank makes the final decision. In my experience, the party with the most supporting documentation is the one who wins.

It’s important to address the chargeback immediately and follow all directions. If you have a local representative who handles your card payment processing, be sure to get them involved.


Chargebacks are no fun, but it comes with the territory in small business ownership.