A chargeback is a forced reversal of a card payment initiated by your bank. If you dispute a charge on your credit or debit card — maybe you did not authorize it, the product never arrived, or it was defective — your bank can pull the money back from the merchant's account.
The chargeback process involves your bank (issuing bank) contacting the merchant's bank (acquiring bank) with the dispute. The merchant has 30-45 days to respond with evidence (proof of delivery, signed receipts). If they cannot prove the transaction was legitimate, the money goes back to you.
Chargebacks cost merchants an estimated $125 billion annually worldwide. Each chargeback typically costs the merchant the transaction amount plus a $20-100 fee. "Friendly fraud" (customers disputing legitimate purchases) accounts for up to 70% of all chargebacks — a growing problem for e-commerce businesses.