- The cardholder disputes a transaction by talking with the card-issuing bank seeking a refund (providing a reason for request).
- The card issuer then reviews the eligibility of the transaction and if it is legitimate, the card issuer charges back the transaction to the merchant’s acquiring bank through a relevant card association such as Visa or MasterCard.
- The card network then screens the chargeback electronically for technical criteria compliance. If it is confirmed, they forward the chargeback to the merchant’s acquiring bank.
- The acquiring bank may either transfer the money immediately from the merchant’s account to the cardholder, or present the request to the merchant first.
- The merchant receives the chargeback notification and can dispute the chargeback to its acquiring bank.
- The acquirer forwards the merchant’s representment to the card association.
- The card network then forwards the represented item to the card issuer.
- The card issuing bank then reviews the case and if the merchant’s case is compelling, they charge the cardholder’s account again for the disputed transaction. However, if the issuing bank deems that the chargeback issue is inappropriately addressed by the merchant’s representation, it may submit a dispute to the card association which triggers arbitration.
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