In the case of a chargeback, a customer disputes a certain charge on their credit card and the merchant must prove that the charge is valid. That is known as a retrieval request. The next step, if the retrieval has proven the charge to be fraudulent, is the chargeback itself.
The chargeback mechanism exists primarily for consumer protection. To start a chargeback a consumer will contact their credit card company and ask for a chargeback. At this point, the dispute process has begun. During this time the merchant will have to prove they rendered the service properly by providing a sales receipt signed by the customer within 12 business days. If the merchant can’t provide sufficient evidence, the credit card company debits the transaction amount from the merchant’s account and credits it to the consumer’s account. Additionally, the merchant is hit with a chargeback fee as a penalty. Host Merchant Services has a Chargeback Fee of $15.
To resolve a chargeback, the acquirer and issuer mediate in the dispute process, following rules set forth by the corresponding bank network or card association. If the acquirer prevails in the dispute, the funds are returned to the acquirer, and then to the merchant. Acquirers may charge merchants a penalty for each chargeback received to encourage compliance.