What is a Chargeback?

A chargeback is a type of payment and represents the movement of funds to or from a merchant. Chargebacks occur when a customer contacts their issuing bank (e.g., Capital One, American Express, Chase) and disputes a payment on their credit card. Customers initiate chargebacks when they believe they were wrongfully charged and request their money back through their bank.

Chargebacks can be initiated within 180 days after a payment is processed, though the exact timing depends on the issuing bank and the dispute reason.

Viewing Chargebacks in Admin

Merchants can see if a chargeback or dispute has been submitted by navigating to Admin > PradoPay and filtering the Payment Type to "Chargeback."

Dispute Reasons

A pay-in can be disputed for several reasons. Some common reasons include:

• Goods/services not delivered
• Products received not as advertised
• Merchant not following its refund policy
• Charged by mistake
• Fraudulent payments

Chargeback Phases

Chargebacks can go through two main phases: Inquiry and Dispute.

Inquiry Phase

A customer or issuing bank may initiate an inquiry before escalating the chargeback into a formal dispute. During an inquiry:

• Merchant can respond and provide evidence that the payment was valid.
• Funds are not pulled back from the merchant at this stage.
• If the merchant responds with sufficient evidence and the bank sides with the merchant, the chargeback is resolved without entering the dispute phase.
• If the merchant responds to the inquiry and the customer's bank decisions the inquiry in favor of the customer, the bank will proceed with a dispute. 

Inquiry Decision Outcomes

1. Merchant wins the chargeback. The funds remain with the merchant. An inquiry can be won by:
   1. Providing sufficient evidence and the bank decisions the chargeback as a win.
   2. The merchant does not respond to the inquiry and the customer does not initiate a dispute within 50 days. This is highly unlikely and in most cases the customer or the issuing bank will initiate the dispute.
2. Chargeback moves to the dispute phase. The funds are pulled from the merchant. A chargeback can move to a dispute by:
   1. Not providing sufficient evidence and the bank proceeds with a dispute.
   2. The merchant does not respond to the inquiry and the customer initiates the dispute.

Dispute Phase

A chargeback can enter the dispute phase by:

1. Customer or issuing bank initiating the chargeback in the dispute phase and the chargeback never went into the inquiry phase.
2. Chargeback proceeded from the inquiry phase to the dispute phase.

During a dispute, the funds are pulled back from the merchant until a decision is made by the customer's issuing bank. Merchants can respond to the dispute by providing evidence that the payment was valid or accept the dispute as a loss.

Chargeback Processing

If the merchant responds to a dispute, the chargeback enters Chargeback Processing, indicating the issuing bank is reviewing the dispute.

Dispute Decision Outcomes

1. Merchant provisionally wins the chargeback. The funds are returned to the merchant, however during this status the issuing bank can overturn their decision and the merchant can lose the chargeback.
2. Merchant wins the chargeback. The funds are returned to the merchant.
3. Merchant partially wins the chargeback. A partial amount of the chargeback is returned to the merchant.
4. Merchant loses the chargeback. The funds remain with the customer.

Chargeback Status 

The chargeback status is the descriptor of the current status in the life cycle of the chargeback.