What is a chargeback?
A chargeback, also known as a reversal, occurs when a buyer asks a credit card company to reverse a transaction that has already cleared. A buyer may file a chargeback with his/her card issuer based on credit card association regulations and timeframes.
Although a chargeback may appear similar to a PayPal claim, it’s actually a process that is granted to a cardholder by their credit card company and initiated outside of PayPal. In a dispute over a chargeback, the decision is ultimately made by the credit card company and PayPal can’t control the outcome.
Two common reasons for reversals or chargebacks are:
A buyer’s credit card number is stolen and used fraudulently.
A buyer makes a purchase, but believes that the seller failed to fulfil their side of the agreement (for example, they did not send the item, sent an item that was very different from the seller's description, or the item was damaged when the buyer received it).
All sellers who accept credit card payments run the risk of being liable for chargebacks. Chargebacks are among the unfortunate costs of doing business. Many sellers factor this cost into their business risk model.