Skip to content

What is the Difference Between a Chargeback and a Refund?

Date Updated: June 23, 2021

In the retail world, chargebacks and refunds are often used interchangeably to describe situations in which dissatisfied customers want to reverse purchases and get their money back.

As a merchant, you lose the sales either way — which is why these return policies are so often confused.

Although chargebacks and refunds share much in common, there are major differences between the two. As a retailer, it’s important that you understand how they work — and what steps you can take to reduce their frequency.

How Do Retail Refunds Work?

Most of us are familiar with refunds — i.e., returns that are initiated by the customer and agreed to by the merchant.

As the merchant, it’s up to you to decide whether or not to reject the customer’s reason. If you agree, it’s simply a matter of crediting that user’s account or returning the money.

How Do Retail Chargebacks Work?

Like refunds, chargebacks are also initiated by the customers. Instead of contacting you directly, customers go through their card-issuing bank to dispute the charges. The bank then credits the users’ accounts before coming after you — the merchant.

Just as with traditional refunds, there are any number of legitimate reasons for triggering a chargeback — including damaged, late or poor-quality merchandise. Another common trigger is when customers don’t recognize certain charges on their credit card statements.

Contact us to learn how your business can reduce/prevent chargebacks, call (888) 255-2901 or visit