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A chargeback is a form of customer protection where a bank or card company requests a charge from the merchants to be reversed. A chargeback can occur if a customer disputes a purchase made using their credit card claiming that it was made without their permission or it was fraudulent. In this case, the credit company reverses the charge and the customer is paid in full by the merchant.

The chargeback Process

  • Submit - A complaint is filed with the bank or credit card company by the customer.
  • Vet - The bank checks the validity of the consumer complaint. If it is valid, then a chargeback process is initiated by notifying the merchant’s bank.
  • Investigation - The merchant’s bank notifies the retailer and researches the purchase that has been put into question. The bank then asks for transactional evidence from the merchant to validate the purchase.
  • Decision - If the chargeback turns out to be justified after the complete investigation then the online retailer is entitled to the amount claimed by the customer plus the fees associated with the bank. In case evidence of a valid transaction is provided by the merchant, then no chargeback is issued.

Ways to limit the number of chargebacks

Watch out for the following red flags to prevent the unauthorized use of cards and limit the chargebacks-

  • Different billing and delivery address - This may be valid but requires extra attention and verification to ensure card authorization.
  • Rush-delivery of big-ticket items requested by new customers - This requires a validity check.
  • Multiple orders within a short span - This may signify unauthorized card use and requires a careful check.
  • Product purchase made with multiple tries on the credit card number - This is an indication of fraudulent activity.
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