Who initiates a chargeback?

A chargeback is initiated when a cardholder disputes a transaction with their issuing bank, usually due to fraud or dissatisfaction with a product or service. In this context, the cardholder directly engages with their bank to resolve the issue, prompting the bank to initiate the chargeback process. This is an essential consumer protection feature in payment systems, allowing consumers to contest unauthorized or erroneous charges.

The role of the issuing bank is crucial, as it serves as the intermediary between the cardholder and the merchant, taking the necessary steps to reverse the transaction if justified. The process requires investigating the dispute and potentially retrieving funds from the merchant's account.

In contrast, the other parties involved—the merchant, acquirer, and payment processor—do not start the chargeback. The merchant is the one from whom the payment is being disputed, the acquirer is the financial institution that processes card payments for the merchant, and the payment processor facilitates transactions between the merchant and the issuing bank but does not initiate disputes. Thus, the cardholder or issuing bank's role is foundational for starting a chargeback.