A chargeback occurs when a customer disputes a charge through their issuing bank. Even if you eventually win the dispute, the processor charges a chargeback handling fee — usually $15–$25 — that you don't get back. Lose the dispute and you also lose the original transaction amount plus the fee.
High-chargeback merchants (typically anything over 1% of transactions) get hit with additional monitoring fees, rolling reserves, and eventually account termination. Visa and Mastercard run chargeback monitoring programs (VAMP, MATCH/TMF) that escalate consequences as the chargeback rate climbs.
Prevent chargebacks: use clear billing descriptors, ship with tracking, respond to customer service requests within 24 hours, and use 3D Secure on high-value online sales.