What is Chargeback?

When a customer requires a refund, the bank makes a charge back (withdraws funds) directly from the account of the merchant, under the condition that the refund request is legit. What this basically means is that for a merchant, a chargeback means a loss of profit. On top of that, each charge back is followed by an administrative fee, which can be quite large, depending on the bank and the chargeback amount. Furthermore, if a merchant gets too many refund requests, the bank is likely to decide to close their account. As a result, the business might even get blacklisted, preventing them from opening a new merchant account at the same bank in the future.