Refunds versus chargebacks: the basics
A refund is handled between you and the customer: you return the money and usually keep the relationship. A chargeback is initiated by the customer's bank and bypasses you, reversing the funds and often adding a fee. High chargeback rates can damage your standing with processors, while refunds generally do not.
- Refunds are resolved directly with the customer.
- Chargebacks are bank-initiated reversals with fixed network rules.
- Chargebacks usually carry a fee; refunds typically do not.
How local wallets handle refunds
Local wallets and real-time bank methods do not always follow the card chargeback model. Some use a retrieval request first, then a refund escalation, and only later a formal chargeback. The timeline and the evidence format can differ from what you know from Visa or Mastercard, so confirm the exact flow per method.
- Some methods start with a retrieval or information request.
- Refund escalation may be handled by the issuer before any chargeback.
- Not every local method supports a formal chargeback at all.
Dispute and chargeback timelines
Customers usually have a window of roughly 60 to 120 days to dispute a card transaction, though other payment types can be shorter. Once a chargeback is filed, you typically have 7 to 45 days to respond depending on the network and reason code. Missing the window usually means an automatic loss. Published pricing is for initial screening only; confirm the provider's official pricing page or a written quote before you go live.
- Card disputes often allow 60 to 120 days from the statement.
- Merchant response windows commonly run 7 to 45 days.
- Late or incomplete responses are usually automatic losses.
Evidence that helps you win a dispute
Winning a dispute depends on matching evidence to the reason code. Common useful documents include order confirmations, delivery tracking with proof of receipt, signed receipts, billing descriptors the customer will recognise, and communication logs showing you tried to resolve the issue. For digital goods, usage logs or download history matter.
- Proof of delivery with the customer's address and date.
- Clear billing descriptors the customer will recognise.
- Communication records showing resolution attempts.
Chargeback ratios and monitoring programs
Card networks monitor dispute ratios. Exceeding a threshold, often around 0.9 to 1.0 percent with a minimum number of chargebacks, can place you in a monitoring program with monthly fines, mandatory mitigation plans, or even loss of processing. Keeping the ratio low protects your ability to keep selling.
- Visa and Mastercard run separate monitoring programs.
- Thresholds are commonly near 0.9 to 1.0 percent of transactions.
- High ratios can lead to fines, reviews, or processing limits.
Questions to ask a provider before launch
Write these down during provider selection so support and finance share one reference. The answers shape how you handle returns, how you staff support, and how you protect your dispute ratio in each new market.
- What is the exact refund and dispute flow for each method?
- What are the response deadlines per method and reason code?
- What evidence format does the provider require?
- Are chargeback fees passed to me, and how are they shown?
- Does the provider offer alerts or representment tooling?
Questions merchants ask
What is the difference between a refund and a chargeback?
A refund is resolved directly between you and the customer. A chargeback is initiated by the customer's bank, reverses the funds, and usually adds a fee. Chargebacks follow strict network rules; refunds follow your own policy.
How long do customers have to dispute a charge?
For card transactions the window is often 60 to 120 days from the statement date. Other payment types, including some wallets and bank transfers, can have shorter windows. Confirm the exact period per method.
Who pays the chargeback fee?
The fee is normally charged to the merchant, debited from your account when the chargeback is raised. Published pricing is for initial screening only; confirm the provider's official pricing page or a written quote before you go live.
What evidence helps win a dispute?
Evidence should match the reason code: delivery proof for item-not-received claims, identity or authorization proof for fraud claims, and clear billing descriptors. Organise everything clearly and submit before the deadline.
What happens if my chargeback ratio is too high?
You may enter a network monitoring program with monthly fines, a required mitigation plan, extra reviews, or processing limits. Very high ratios can threaten your ability to keep accepting cards.
Do local wallets use the same dispute rules as cards?
Not always. Some wallets use retrieval and refund-escalation steps before any chargeback, and some methods have no formal chargeback at all. Ask each provider for the specific flow and deadlines per method.