Introduction to Chargebacks and their lifecycle

Learn about chargebacks and receive an overview of their lifecycle

What is chargeback?

A dispute (also known as a chargeback) occurs when an account holder questions their payment to you with their bank. The issuing bank creates a formal dispute which immediately reverses the payment. The total disputed amount will then be deducted from your payout along with any chargeback fees.

You must respond to the dispute on or before the due date stated in the dispute notification you received. Otherwise, the bank will automatically rule in favour of the customer and the money will be returned to them.

There are different dispute categories/reasons and product types that will determine what evidence you need to provide in order to challenge a dispute.
Please see below explanation of these to familiarise yourself with the terminology used.

For more information on the evidence to provide for a robust defence, please refer to "Evidence to Challenge a Chargeback"

Chargeback Categories:

• Credit not processed - The customer claims they’re entitled to a full or partial refund because they returned the purchased product or didn’t fully use it, or the transaction was otherwise canceled or not fully fulfilled, but you haven’t yet provided a refund or credit.
  
  
• Duplicate - The customer claims they were charged multiple times for the same product or service.
  
  
• Fraudulent - The customer might have made an error and failed to recognise a legitimate charge on their credit card statement, or they might have genuinely been a victim of someone using their card fraudulently.
  If you believe the payment was indeed fraud, the appropriate action is to either accept the dispute or decline to challenge it.
  
  
• General - This is an uncategorised dispute, so contact the customer for additional details to find out why they disputed the payment. This should be fairly rare for cards disputes.
  
  
• Product/Service Not Received - The customer claims they did not receive the products or services purchased.
  
  
• Product/Service Unacceptable or Not As Described - The customer received the product but claims it was defective or damaged in some way or was not described or represented in an accurate manner prior to purchase.
  
  
• Subscription canceled - The customer claims that you continued to charge them after a subscription was canceled.
  
  
• Unrecognised - The customer doesn’t recognise the payment appearing on their card statement. This is effectively indistinguishable from the Fraudulent reason.

Product types of the disputed transaction:

• Physical products are tangible goods that were either purchased in a store or shipped to the recipient, so evidence often proves the customer is in possession of the item.
  
  
• Digital products or services are often virtual in nature and don’t have trackable shipping data, so focus on evidence of usage, login, or download.
  
  
• Offline services include purchases that are made in advance, such as event tickets and reservations, where evidence of a cancellation policy can be material.
  
  

How do disputes work?

When someone files a dispute, the process varies slightly across different payment methods and card networks, but typically follows a standard pattern shown here:

Notification

When an account owner disputes a charge with their bank, APRIL:

• Notifies you of the dispute via email and webhooks
• Updates the transaction status in your merchant dashboard to "Disputed"
• Debits the disputed amount, plus a dispute fee, from your payout
• Provides you with an explanation of the dispute and submits convincing evidence on your behalf to counter the dispute

Throughout this process, APRIL facilitates your case, but doesn’t have influence over the outcome, which is at the sole discretion of the account owner’s bank.

Before the dispute

Inquiries

Some card networks initiate a preliminary phase before creating a formal dispute and chargeback. This preliminary phase is called an inquiry, though it is sometimes also called "retrieval" or a "request for information".

During this phase, the cardholder’s bank requests transaction clarification, often because the cardholder doesn’t recognise the transaction description. You can resolve the case without incurring a dispute fee by either providing satisfactory evidence that answers the dispute type for the inquiry, or by issuing a full refund. Inquiries on partially refunded charges can still escalate to a chargeback.

During the dispute

Whether it’s because of an inquiry was escalated, or for some other reason, when the account holder files a formal dispute against a payment, the action initiates a chargeback where the card issuer pulls the funds for the dispute from APRIL and holds it for the entire duration of the dispute. This might be for the full amount of the charge or a different amount.

Receiving a dispute

A dispute being initiated will trigger several processes:

• The issuing bank debits APRIL for your disputed payment and related dispute fees
• APRIL withholds the disputed amount plus a dispute fee from your payout
• APRIL notifies you of the dispute in order to manage the case on your behalf
• You can’t issue a refund outside the dispute process while the dispute is open
• Your Dispute Rate increases

Timing

Card networks typically allow cardholders to initiate disputes within 120 days of the original payment.

Following the creation of the chargeback, you have a limited amount of time (usually 7-21 days, depending on the card network) to respond to the card issuer.

If you submit evidence, the issuer also has a limited amount of time (usually 60–75 days, depending on the card network) to evaluate the evidence and decide the outcome.

The full lifecycle of a dispute, from initiation to the final decision from the issuer, can take as long as 2-3 months to complete. There are no actions a business can take to reliably accelerate this timeline, other than to decline to contest the dispute by accepting it.

At the completion of the dispute process, the issuer either overturns the dispute in your favour or upholds the dispute in their cardholder’s favour.

• If the issuer overturns the dispute, they return the debited chargeback amount to APRIL, and APRIL passes this amount back to you on your next payout.
• If the issuer upholds the dispute, nothing changes from your perspective and no money moves—the card issuer already collected the chargeback amount. The issuer will return the funds to the cardholder at some point during—or even after—this process. The timing of the cardholder’s credit is entirely at the issuer’s discretion.

Responding to a dispute

In most cases, you have the option to either accept or challenge the dispute raised.

• You can accept the dispute if you do not intend to challenge the dispute by submitting evidence that addresses the dispute reason, effectively agreeing with the account holder that the dispute was valid.
  To proceed, please advise our team at [e-mail] with your decision and we will accept the dispute on your behalf.

• Please note: The refund option is no longer available on your dashboard once the transaction has been disputed.
  The card issuer has already collected funds from April, so if the customer contacts you asking for a refund, advise them to contact their bank.

• In most cases, you have the ability to challenge the dispute, as long as you submit strong evidence that invalidates the dispute claim before the deadline.
  
  Please note, as soon as a dispute is active, the only way to overturn it is by submitting evidence in a response. Even in cases where your customer claims to have withdrawn the dispute, you must respond with evidence for the dispute to be closed in your favour. Submitting evidence is what signals to the issuer that you don’t accept the dispute and want to have the funds returned to you.

This page outlines the suggested pieces of evidence that we can submit depending on the dispute type and the type of goods and services you offer.

Please note that we only have one opportunity to submit our response. We can’t edit the response or submit additional files, so make sure you’ve assembled all your evidence before we submit.

After the decision

After you submit your evidence, the next notification from the card issuer to both APRIL and you is the final decision on whether the dispute is won or lost. You will be notified via email and webhooks as soon as the issuer makes its decision clear.

Disputes are decided by your customer’s bank, according to the bank’s process. The steps we follow to help you respond to the dispute and submit evidence are rigidly defined, but the decision made by the bank can be affected by a number of factors. Often the decision on who wins a dispute comes down to a judgement call by the bank. APRIL has no way to affect this judgement call beyond submitting evidence on your behalf.

This outcome is final for all parties. You can't overturn a lost dispute, but your customer also can't overturn a dispute decided in your favour.