Chargeback Period

A chargeback period is the time frame during which a credit card holder can dispute a credit card transaction with a merchant. Disputed charges within the chargeback period typically are credited back to the cardholder while the dispute is resolved. Chargeback periods vary by payment processor and by transaction type, but are typically 120 days following the initial purchase or delivery of the purchased goods.

Chargeback periods are important to merchants because they lose the money from the sale when the charge is credited back to the customer’s credit card account. In addition, merchants pay the card issuer a penalty fee for each chargeback, typically $20-$50. Once the chargeback period has expired however, the consumer can no longer initiate a chargeback.

Chargebacks are meant to protect consumers from fraud, but also to encourage them to use credit cards instead of cash, since card purchases are effectively guaranteed by the card issuer. A consumer might dispute a transaction if the merchant accidentally double charged for the same purchase; if they bought something online but never received it; or if a merchant continues to bill for a canceled subscription, among other reasons. 

When faced with a billing dispute, most consumers do not attempt to resolve the problem with the merchant first; instead, they simply request the chargeback through their credit card issuer, often with a simple click on the card account’s website. In part this is because many customers are aware of the chargeback period and want to make their claim quickly. As a result, the card issuer levies a chargeback fee on the merchant that may have been avoided if the dissatisfied customer worked with the company directly.

Another problem is that many chargebacks are fraudulent. For example, a consumer might claim that they never received an online purchase and try to get a refund when they actually did receive the item, a practice called “online shoplifting.” If customers request too many chargebacks from the same business, the payment processor might assume that there is a problem with the business and refuse to process any further credit card transactions. That presents a major problem for online businesses that rely on credit card payments.

Chargeback periods vary depending on the policies of the payment processor (such as Visa or Mastercard) and the type of transaction. For example, Mastercard has a chargeback period of 120 days from the delivery date for goods that a consumer doesn’t receive or raises an issue related to quality. The chargeback period is also 120 days for many other problems, such as an incorrect transaction amount or duplicate transaction. Visa also has a 120 day chargeback period for such transactions. Both processors have shorter chargeback periods for problems such as the merchant providing unclear or illegible transaction information to the processor or accepting an expired credit card.