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While doing online shopping, flight ticket booking or making daily payments through credit card, such situations often arise when money is deducted but service is not received, wrong goods are delivered, or any unauthorized transaction is done with the card. In such a situation, customers have two main ways to get their money back –Refund And Chargeback. Many people consider these two to be the same, whereas their process, time limit and way of working are completely different. If the merchant is not listening to you, your money may be stuck for months without knowing the right option.
Understanding the basic difference between refunds and chargebacks is important for financial security. While a refund is a direct settlement between the customer and the merchant, a chargeback is a formal banking dispute process in which your bank directly intervenes and withdraws the money from the merchant’s account and returns it to your account, temporarily or permanently. Let us know what are the main differences between the two and when which option should be used.
| Base | Credit Card Refund | Credit Card Chargeback |
| Who takes the initiative? | Merchant (shopkeeper/company) | Cardholder (customer through his bank) |
| parties involved | Customer and Merchant (Bank is only medium) | Customer, Card Issuing Bank, Payment Network (Visa/Mastercard) and Merchant Bank |
| nature of process | Voluntary and amicable (friendly agreement) | Disputed and Formal (Merchant may face penalties) |
| Reason | Order Cancellation, Product Returns, Flight Cancellation | Fraud, duplicate billing, non-delivery of goods and refusal of refund by merchant. |
| Time Limit (TAT) | usually 2 to 7 business days | 30 to 90 days (Final decision after investigation) |
| impact on merchant | no penalty | Merchants are charged chargeback fees and their ratings are affected |
Refunds occur when you purchased a good or service from a merchant (like Amazon, Flipkart, MakeMyTrip or any store), but later you canceled the order or returned the goods. In this situation the merchant itself accepts that the deal has been canceled and sends the amount back to your card through its payment gateway.
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How does this work: The merchant’s system sends a reversal request to your bank. The bank credits this amount to your credit card outstanding within 2 to 7 working days.
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When to adopt: When the merchant is in compliance with your cancellation or return policy and has issued a refund ID (ARN/RRN Number) from his end.
Chargeback is a type of security cover provided by credit card networks (Visa, Mastercard, RuPay, Amex) to protect customers from fraud and wrong billing. When the merchant cheats you, does not deliver the goods even after deducting the money, or flatly refuses to give a refund after making a wrong charge, then you demand a ‘chargeback’ from your bank.
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How does this work: Your bank recovers the amount from the merchant’s bank (Acquiring Bank) based on your evidence. The bank will often grant a provisional credit on your card while the investigation is ongoing. The merchant is given 14 to 30 days to present evidence in his defense. If the merchant can’t prove its case, the chargeback becomes permanent.
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When to adopt:
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In case of fraudulent or unauthorized transaction with the card.
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When money is deducted twice for the same purchase (Duplicate Billing).
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In case goods or services are not received despite full payment and merchant refuses to provide refund.
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In case of receipt of damaged or counterfeit goods and termination of support by the merchant.
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If your money is stuck in a transaction, it is mandatory to follow the correct legal and banking procedure:
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Step 1 (Contact the merchant): First of all, talk to the customer care team of the concerned merchant over email or chat. Save the order number, transaction date and cancellation receipt. Please allow 5 to 7 days for the merchant to refund.
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Gather written evidence: Create a PDF by taking screenshots of merchant conversations, cancellation requests, invoices and delivery slips.
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File a chargeback (if merchant doesn’t resolve): If the merchant does not respond or declines the refund, immediately go to the app or website of your credit card issuing bank. Select the relevant transaction and “Dispute Transaction” Or “Raise Chargeback” Click on the option.
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Select the correct cause of dispute: Select the correct reason in the form (eg Goods Not Received, Defective Goods, Duplicate Transaction etc.) and upload evidence of the conversation with the merchant.
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Keep in mind the RBI timeline: There is a certain time limit for filing a chargeback. usually from the date of transaction within 60 to 120 days Only chargeback can be filed. In case of fraud, as per RBI rules, the customer does not have any liability if the bank is informed within the first 3 days.
Often customers stop paying credit card bills before the dispute is resolved, leading to late payment fees and hefty interest (36% to 42% per annum). Until the bank gives you official ‘temporary credit’ or waiver, maintain the minimum due amount or get confirmation from the customer care of the bank to block that particular disputed amount. Also, never file a false chargeback; If the merchant provides strong proof of delivery, the bank will reject the chargeback and you may also be charged a dispute fee.