Chargeback
Definition
A chargeback is a forced reversal of a credit card payment initiated by the customer's bank, usually because the customer disputes the charge.
What Chargeback Means for Your Business
What it means
A chargeback is what happens when a customer calls their bank instead of the shop and says, 'I did not authorize this' or 'the work was not done.' The bank pulls the money back and asks the shop to prove the charge was valid.
Why it matters
Chargebacks cost you the revenue, the chargeback fee (usually $15 to $25), and sometimes the parts and labor already spent. Excessive chargebacks can also put your merchant account at risk.
How contractors use it
Shops prevent chargebacks with clear invoicing, digital signatures on every job, before-and-after photos, and prompt customer follow-up. When disputes arrive, they respond fast with documentation to reverse the chargeback.
Real-World Example
An HVAC company received 14 chargebacks in Q2 totaling $8,900. After adding digital signatures and photo proof on every job, chargebacks dropped to 2 per quarter and recovered $7,200 per year.
Related Terms
Merchant Account
A merchant account is a specialized bank account that allows a business to accept credit and debit card payments from customers.
Interchange Fee
An interchange fee is the portion of a credit card processing fee that the merchant pays to the card-issuing bank on every transaction.
Digital Signature
A digital signature is a legally binding electronic mark a customer applies to a document on a screen, replacing a physical ink signature.
Proof of Completion
Proof of completion is the documented evidence, usually photos, notes, and signatures, that confirms a service job was finished and delivered to the customer's satisfaction.
Credit Memo
A credit memo is a document that reduces or reverses a previously issued invoice, typically for returns, refunds, or billing corrections.
Put This Into Practice with Free Software
Kaldr Tech handles chargeback and everything else you need to run your shop. $0/month, 3.5% + 30¢ per transaction.