Chargeback
In one sentenceReturning the amount of a card transaction to the cardholder at the request of their bank after they dispute it, so the amount is deducted from the merchant who received it.
Simply put
If the customer tells their bank that the order did not arrive or that they did not make the transaction, a chargeback may be carried out: the amount is taken from the merchant's account, and fees may be added.
To reduce chargebacks, keep proof of delivery and of communication with the customer, and record the chargeback as a reversal of the sale until the dispute is settled.
Worked example
An online auto parts store received a chargeback for an order worth 1,150 SAR, and the gateway added an assumed fee of 50 SAR for illustration.
Amount of the reversed transaction1,150 SAR
Assumed chargeback fee50 SAR
Deducted from the merchant1,150 + 50 = 1,200 SAR
What the store lost from its account1,200 SAR
Don't confuse it with
Credit noteThe seller issues a credit note by choice for a return, while a chargeback is imposed by the customer's bank after the customer disputes the transaction.