Payment Dispute

A payment dispute arises when a cardholder contacts their bank to challenge a charge on their account. This type of dispute can occur for several reasons. Often, the cardholder may not recognize the charge and suspects it to be fraudulent. Alternatively, the cardholder might have experienced issues with a purchase—such as receiving defective goods, not receiving items as described, or encountering service failures—and was unable to resolve these issues directly with the merchant.

When a cardholder raises a dispute, the issuing bank reviews the claim to determine its validity based on predefined criteria, such as evidence of the transaction, merchant's return policy, and communication between the cardholder and merchant. If the bank concludes that the dispute is justified, it will initiate a chargeback, effectively reversing the transaction. During a chargeback, the funds that were originally debited from the cardholder’s account are credited back, and the amount is then debited from the merchant’s bank account.

The chargeback process is an important consumer protection mechanism within the payment card industry, designed to provide cardholders with a means of recourse in cases of fraudulent transactions or merchant disputes. However, it is also subject to strict regulations and procedures to prevent abuse, ensuring that both cardholder and merchant rights are considered.