A chargeback mechanism is a dispute redressal mechanism that a cardholder can use to claim a refund in case of a fraud, dispute or even denial of service
As a customer, depending upon your bank, you have 45-120 days from the date of transaction to file a chargeback request
Imagine you are paying a restaurant bill through your card and the money gets debited but doesn’t reach the merchant’s account. Or you are booking a ticket online and by the time the payment process gets completed, you get a “session timed out" error, but you also get an SMS saying the money has been debited.
Typically, the amount gets credited back to your account in a few days, but what if it doesn’t? In such a situation, you can raise a “chargeback" request with your bank. A chargeback mechanism is a dispute redressal mechanism that a cardholder can use to claim a refund in case of a fraud, dispute or even denial of service like refusing to deliver a product within the promised number of days.
As a customer, depending upon your bank, you have 45-120 days from the date of transaction to file a chargeback request.
To raise a request, you need to fill up a form and submit it to the bank (issuing bank) that issued you the card with which you transacted. You will need to submit the transaction details along with the reason for raising the chargeback request. The issuing bank will then trace the trail and raise the request with the acquiring bank, the bank where the money got deposited. The acquiring bank will then investigate where it settled the transaction—it could be the merchant itself, a payment facilitator or aggregator. The acquiring bank will then raise the chargeback with the payment aggregator, which will then trace the merchant.
The merchant will then either accept the chargeback or contest it. The merchant can contest the claim by providing a proof of delivery of the goods or services. This will be communicated to the acquiring bank, the issuing bank and the consumer. If the merchant accepts the chargeback, it will be an acknowledgement of not providing the said service. The payment aggregator will then deduct from the merchant’s account and pass it on to the acquiring bank, which in turn will pass it on to the issuing bank, and finally the money will reach the cardholder. If the merchant does not respond within a given timeline, then too the aggregator will debit the merchant’s account and pass on the amount to the consumer.
If the consumer claims to not have received the service even after the merchant furnishes proof, the merchant will need to provide additional proof. If the dispute is still not resolved, it will go into an arbitration phase wherein the entire transaction will be investigated by the payment service providers and the side found to be in violation—the merchant or the consumer—will have to pay a penalty at the end of the inquiry.
While denial of a service is a valid ground for you to raise a chargeback, it will also depend upon the terms and conditions that you have agreed to. For instance, even if the merchant claims that you will get a delivery within five days but you get it in 10 days and then claim a chargeback, the merchant can use the terms and conditions in its defence and state that the delivery time may vary. There could also be a time duration mentioned in the terms during which the merchant would respond to disputes.
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