What is the difference between a refund and a chargeback? They both give the customer their money back, but there are substantial differences between the two. A chargeback is is a forced refund from a bank/credit card provider. Once a chargeback is issued, there is no way to refund a customer.

Probably the greatest difference is that when a bank/credit card provider intervenes on behalf of their customer, they charge the merchant a fee.  A refund, on the other hand is between you and your customer with no banking fees to pay.  Additionally, a refund is an immediate resolution to a customer’s needs. In many cases a customer will be satisfied with a credit toward a future purchase or a replacement for the item rather than a refund.

Too many chargebacks will eventually get a merchant account closed. In the case of 2Checkout, this means that our merchant account is the one at risk. To protect our merchant account standing, we do everything we can to lower the number of chargebacks we receive . Even though the bank/credit card provider intervenes, you still have the option to challence the chargeback. Since the process involved in challenging a chargeback can be quite time consuming and complicated, you may want to contact a customer about the chargeback to resolve any issues and potentially get the chargeback reversed.

As you see a refund allows you the opportunity to communicate with your customer, to come to a resolution, and to avoid additional banking fees.  This is one of the reasons why it is a smart business decision to include a clear refund policy on your website.