Chargebacks are most often used to reverse financial charges related to unacceptable or fraudulent transactions. When buyers purchase goods or services with a credit card, and the seller does not comply with the terms as described, consumers may issue chargebacks through their credit card companies. The amount paid will then be "charged back" to the seller's account. There are frequently additional fees charged when chargebacks occur. These fees may be used to pay for processing such complaints.
Chargebacks may be caused by a misunderstanding, but they are also frequently the result of bait and switch tactics or other unethical practices used by sellers who sell products sight unseen. Sellers who utilize auction sites seem to have their share of chargebacks. This is generally because the item is not of the same quality as described, is broken or destroyed in transit, or is never received. Chargebacks also occur, in some cases, because buyers simply change their minds.
Brick and mortar retailers also incur a certain amount of chargebacks. The consumer can initiate a claim against credit card charges within thirty days of a purchase. This option offers consumers a way to fight back when they are sold low quality products by stores with questionable return or refund policies.
When identity theft or credit card theft occurs, chargebacks may keep the consumer from having to pay for goods he or she did not purchase. If the credit card company isn't prepared to absorb the charges, perhaps because the seller did not verify the credit card, the seller may be held responsible for the cost.
There are different types of chargebacks that relate to government agencies or business-to-business practices. If a state or the federal government takes on the cost of a program that is the responsibility of another agency, the government may initiate chargebacks against future funding. With businesses, one company may subtract money owed to another because of faulty goods or services, or because work wasn't completed by a particular deadline.