Chargeback: What It Is and How Consumers Can Use It

Nikita Veremeev

27.07.2025 | 6 min read

Updated: 27.07.2025

In 2024, the global volume of chargebacks exceeded $100 billion, and this figure continues to grow with the development of e-commerce and digital payments. Every third company operating in an international environment has faced transaction disputes, and over 60% of consumers have initiated a card refund at least once.

Why has the chargeback become an integral part of the modern financial system? How does this tool affect consumer protection and business sustainability? And why is strategic chargeback management not only a matter of financial compliance but also survival in the global market?

In practice, the COREDO team has encountered situations where even experienced entrepreneurs lost tens of thousands of euros due to incorrect chargeback processing or ignoring acquiring and payment system nuances. Meanwhile, the competent use of chargebacks allows not only to recover funds in cases of card fraud but also to build effective client interest protection and minimize reputational and financial risks.

In this article, I will analyze in detail what a chargeback is, how the card refund procedure works, the strategic challenges companies and consumers face in Europe, Asia, and Africa, and share practical recommendations based on COREDO’s experience. If you want to not only understand chargebacks but learn to use them as a protection and growth tool, I recommend reading this guide to the end.

What is a chargeback and how does the card refund process work?

Illustration for the section "What is a chargeback and how does the card refund process work" in the article "What is a chargeback and how to use them correctly as a consumer"

Basic principles and stages of the chargeback process

A chargeback is a transaction dispute mechanism that allows a cardholder to initiate a refund through the issuing bank if the service was not provided, the item not delivered, or fraud occurred. The chargeback process is regulated by international payment systems (Visa, Mastercard, UnionPay) and includes several key stages:

Chargeback initiation: The client submits a claim to their issuing bank, stating the reason for the dispute (chargeback reason codes).
Bank investigation: The issuing bank analyzes documents, requests information from the acquirer (merchant’s bank), and initiates the chargeback dispute process.
Refund: If the claim is justified, the funds are temporarily returned to the client’s card (chargeback life cycle).
Chargeback representment: If the seller disagrees with the chargeback, they can provide counter-evidence.
Arbitration: In complicated cases, the dispute is transferred to the payment system for a final decision (arbitration chargeback).

COREDO’s practice confirms: the success of a chargeback depends on the correct documentation, timely responses, and understanding of payment system rules in each jurisdiction.

When can you initiate a chargeback: typical reasons

The most common reasons for chargebacks include:

Credit card fraud: Unauthorized charges, data theft, chargeback fraud.
Service not provided or item not delivered: A classic case for e-commerce and online subscriptions.
Double charging: Technical acquiring failure.
Contract breach: Product not matching the description, refusal to refund.
Consumer fraud: When a client abuses the chargeback procedure.

A real case from COREDO’s practice: a European SaaS provider faced massive chargebacks on service subscriptions due to incorrect communication of auto-renewal terms. Proper handling of the chargeback dispute process and implementing a transparent refund policy reduced the chargeback ratio below the critical threshold of payment systems.

Difference between a chargeback and a standard refund

A classic refund for a product or service: a voluntary action by the seller under the return payment policy. Chargeback: a forced procedure initiated through the bank and payment system when parties can’t agree directly, or fraud is involved. For businesses, it’s important to understand: a chargeback automatically triggers a bank dispute over the transaction and can affect the chargeback threshold and acquiring relationships.

How to correctly initiate a chargeback: a step-by-step instruction for consumers

Illustration for the section "How to correctly initiate a chargeback: a step-by-step instruction for consumers" in the article "What is a chargeback and how to use them correctly as a consumer"

What documents are needed for a chargeback for an online purchase and other cases

To successfully process a chargeback, you need to gather a package of documents confirming the dispute:

Receipts, account statements, payment confirmation
Correspondence with the seller (emails, chats)
Proof of service non-delivery/item not delivered (screenshots, tracking)
Contract or offer
Complaint letter to the seller

The solution developed by COREDO involves creating a single documentation template for different dispute categories, which significantly speeds up the bank investigation and increases the likelihood of a refund through the issuing bank.

Chargeback review times and stages in different countries and payment systems

Chargeback review times depend on the payment system and country:

Visa/Mastercard: Typically 30–120 days from the transaction date.
PSD2 (EU): Tightened requirements for chargeback life cycle times and transparency.
UnionPay (Asia): Extended periods up to 180 days are possible, especially for international payments.

In Europe, chargebacks often involve additional documentation requirements and mandatory pre-trial settlement. In Asia and Africa, periods can be longer, with less formalized evidence requirements. COREDO’s experience showed that prompt action and a full document package are key to success.

Common mistakes when processing a chargeback and how to avoid them

Common mistakes:

Incomplete document package
Missing submission deadlines
Incorrectly selected reason code
Lack of attempt to settle the dispute directly

COREDO practice: implementing a checklist for clients reduces the number of chargeback denials by 40%. It’s important to remember: prevention of chargeback starts with effective communication and transparent deal terms.

Chargeback for business: risks, opportunities, and best practices

Illustration for the section "Chargeback for business: risks, opportunities, and best practices" in the article "What is a chargeback and how to use them correctly as a consumer"

How chargebacks affect business: financial and reputational impacts

A high chargeback ratio threatens acquirer blocking, fines from payment systems, and loss of client trust. The chargeback threshold for most payment systems is 1%, exceeding this threshold can lead to a review of cooperation terms or even termination of the contract with the acquiring bank. Financial disputes in e-commerce and chargeback liability shift: real challenges for any international business.

How to protect your business from unwarranted chargebacks and chargeback fraud

Effective chargeback mitigation includes:

Implementing a multi-level KYC procedure
Regular transaction audits
Use of anti-fraud systems
Transparent refund policy and client communication
Timely response to chargeback representment

The COREDO team implemented projects for automating the chargeback dispute process for large e-commerce platforms, which reduced costs of refund payouts and minimized chargeback fraud.

Integration of chargeback processes with AML/KYC and compliance policies

Modern PSD2 standards and international financial compliance requirements oblige companies to integrate chargeback procedures with AML and KYC policies. This not only reduces the risk of consumer fraud but also increases the transparency of financial risk management. COREDO’s experience showed that automating chargeback monitoring and implementing a risk-based approach allow companies to quickly detect anomalies and prevent chargeback fraud at early stages.

Characteristics of chargebacks in Europe, Asia, and Africa: international nuances

Illustration for the section "Characteristics of chargebacks in Europe, Asia, and Africa: international nuances" in the article "What is a chargeback and how to use them correctly as a consumer"

Comparison Table: main differences in chargeback across jurisdictions

Region	Review times	Document requirements	Features
Europe	30–90 days	Detailed, per PSD2	Strict compliance, consumer protection
Asia	30–120 days	Depends on the country	Restrictions may apply to transaction types
Africa	30–180 days	Often simplified	Dependence on local regulations

Chargeback reason codes and requirements of issuing banks can vary significantly. For example, chargeback for non-EU residents requires additional identity verification and source of funds confirmation. In international transactions, payment system rules and local refund standards play a crucial role.

Practical recommendations: how to effectively use chargebacks and minimize risks

Illustration for the section "Practical recommendations: how to effectively use chargebacks and minimize risks" in the article "What is a chargeback and how to use them correctly as a consumer"

Checklist for consumers and businesses

Check return conditions before payment
Keep all transaction documents
In case of a dispute: first, try to settle the issue with the seller
If there is no result: initiate a chargeback through the issuing bank
Use chargeback documentation templates developed by experts
For businesses: implement regular chargeback audits and monitor the chargeback ratio
Integrate chargeback mitigation into the company’s risk management

Key takeaways and actionable advice for entrepreneurs and managers

Chargeback, not only consumer protection but also a strategic risk management tool for businesses
Proper chargeback mitigation reduces costs, protects reputation, and strengthens relationships with payment providers
Integration of chargeback processes with AML/KYC and compliance policies is a mandatory standard for international companies
Use chargeback analytics to identify trends and optimize refund costs
COREDO is ready to offer tailored solutions for chargeback automation and support in any jurisdiction

Frequently Asked Questions about Chargebacks (FAQ)

What to do if the bank denied a chargeback?
It is recommended to request a written justification for the refusal, prepare additional evidence, and if necessary, initiate an arbitration chargeback through the payment system.

What are the review times for chargebacks in Europe and Asia?
On average, 30–90 days for Europe and 30–120 days for Asia, but times depend on the specific payment system and the type of dispute.

Can a chargeback be initiated for a legal entity?
Yes, but documentation and dispute justification requirements are higher for businesses, especially in B2B transactions and international payments.

How to protect a business from chargeback fraud?
Implement multi-level customer identification, use anti-fraud systems, train staff, and regularly analyze the chargeback ratio.

How is a chargeback related to VAT refunds and tax reporting?
In some countries, refunding funds via chargeback may require adjusting tax reporting and VAT refund. COREDO practice: we recommend consulting tax experts for large refund transactions.

What modern technologies automate chargeback investigations?
Specialized SaaS platforms, integration with acquiring, AI algorithms for detecting chargeback fraud, and analytics dashboards for monitoring the chargeback life cycle are used.

Effective chargeback management is not only about protecting the client’s interests but also a strategic factor in the resilience of international business. Solutions developed by the COREDO team enable companies and entrepreneurs not just to react to chargebacks but to use this tool for growth, trust, and long-term success.

What is a chargeback and how to properly use it as a consumer