When you make a purchase with your credit card, you are essentially borrowing money from the credit card issuer. If you don’t pay back that debt, the issuer can take action to recoup the loss. This is called a chargeback.
There are a few different ways that chargebacks can happen, but they all ultimately come down to the same thing: you didn’t pay your bill, so the credit card issuer is taking the money back from the merchant.
Chargebacks can be a pain for merchants, because they not only lose out on the sale, but they also have to pay a fee to the credit card issuer. And if too many chargebacks happen, the merchant could even lose their ability to accept credit cards.
That’s why most merchants have something called a chargeback limit. This is the maximum amount of money that a merchant is willing to lose to chargebacks in a given period of time. If the limit is reached, the merchant may stop accepting credit cards altogether, or they may start requiring customers to pay in cash.
Chargeback limits vary from merchant to merchant, but they’re typically around 1-2% of total sales. So, if a merchant does $1,000 in sales in a month, their chargeback limit might be $10-$20.
Of course, chargebacks can’t always be avoided. But if you’re a customer, it’s important to be aware of them. And if you’re a merchant, it’s important to know how to keep chargebacks under control.
What is a Chargeback?
A chargeback is when a credit card issuer takes money back from a merchant because the customer didn’t pay their bill. It’s basically when you don’t pay your credit card bill, and the company that issued your card refunds the merchant.
Chargebacks can be a pain for merchants, but they are a necessary evil. If you’re a customer, be aware of chargebacks and try to avoid them. And if you’re a merchant, keep an eye on your chargeback limit and take steps to prevent chargebacks from happening.