How a Credit and Debit Card Chargebacks Affect the Merchant

Any cardholder who uses a payment card (credit, debit or prepaid) has the right to utilise the consumer protection mechanism known as the chargeback. Both consumers and merchants should be aware of the conditions that apply to using this consumer protection, including the difference between debit and credit card chargebacks, when disputes can legally be filed, and how chargebacks affect the merchant.

Chargebacks Explained

The Truth in Lending Act of 1968 laid the groundwork for credit card chargebacks. However, payment industry experts recognize The Fair Credit Billing Act of 1974 as the invention of chargebacks. Debit card holders were awarded reversal rights courtesy of Jimmy Carter’s 1978 Electronic Fund Transfer Act.

Chargebacks were designed to protect consumers from two types of fraud associated with credit or debit card transactions.