Chargebacks - an introduction

What is a chargeback?

When a cardholder contacts their card issuing bank to dispute a payment, a chargeback is raised to the merchant.

Typical reasons for a cardholder disputing a payment:
  • The card had expired at the time of the transaction
  • The card was accepted before it was valid
  • The card number is incorrect and cannot be applied to an existing account
  • The cardholder did not receive the goods or services ordered
  • The cardholder returned goods to the merchant
  • The merchant agreed to process a refund, but the cardholder has not received a credit on their account
  • The cardholder cancelled their Recurring Payments (FuturePay) agreement and the funds were still debited from their account
  • The cardholder states that they did not authorise or participate in the transaction
  • The cardholder has received goods that are not the same as described when ordered
  • The cardholder received defective goods/services
  • The transaction was processed more than once in error
  • A refund transaction was processed as a sale
  • An incorrect amount has been processed or key entered

The chargeback process - an overview

1. A cardholder has a problem with a transaction

2. The cardholder informs their card issuer (bank or credit card company) of the problem, and asks for their money back

3. The card issuer does some research to see if the cardholder's demand is reasonable. If the cardholder's demand is unreasonable, the cardholder is responsible for the payment, and the merchant is paid as normal

4. If the cardholder has a case, the card issuer makes a provisional credit payment to the cardholder

5. The card issuer starts the chargeback process, and obtains funds from the acquiring bank that will debit the funds from the merchants account in turn

6. The acquiring bank sends a Notification of Chargeback (NoC) and a Request for Information (RFI) to Worldpay

7. The merchant is sent the RFI email. The payment appears on our payment service, on a list of disputed payments in the Payment Disputes screen

8. If the merchant ignores the RFI and the disputed payment on the payment disputes screen, the chargeback automatically proceeds unchallenged and the money is gone for good

9. If the merchant responds to the RFI they do so by uploading information to defend the disputed payment in the Payments Dispute screen

10. Worldpay forwards any information the merchant has uploaded to the card issuer

11. The card issuer looks at the information provided and follows the rules and regulations associated with the card

12. The card issuer decides if the information provided by the merchant satisfies their criteria to refuse a chargeback request and informs all parties of their decision

The result

If the information provided satisfies the card issuers criteria the transaction will be upheld and the disputed funds will be returned to the merchant.

If the merchants information fails to satisfy the criteria, or arrives too late, the chargeback is automatically valid and the acquiring bank pays the card issuer the money back.

Worldpay charge the merchant an administration fee for processing the chargeback.

Chargeback timeframes

The chargeback time frame varies depending on the reason for the transaction dispute and which card issuer raises the chargeback.

The cardholder can dispute a payment up to several months after the purchase date.

Typically, the card issuer then has up to 190 days from this day to successfully dispute and recover the payment on behalf of the cardholder.

Once a merchant has submitted their defence information, Worldpay advise that the card issuer has 60 days from when the first request for information was sent to make their decision.

Chargebacks by business sector