What Is a Chargeback? A UK Merchant’s Guide to Disputes, Fees and Time Limits

The first chargeback usually arrives as a surprise: a letter or dashboard notification saying a payment you took weeks ago has been disputed, the money has already been deducted, and you have until a printed date to respond. None of that is the provider being difficult. It is the card schemes’ standard dispute machinery, it runs the same way on every provider, and once you understand the flow you can make a calm commercial decision on each dispute instead of an indignant one.

What a chargeback actually is

When a customer pays by card, the payment can be unwound later through the card scheme if the cardholder disputes it with their bank. Common triggers on a card machine: the customer does not recognise the payment on their statement, they were charged twice, the amount is wrong, they claim they never received what they paid for, or the card was used fraudulently. The customer’s bank raises the dispute through Visa or Mastercard, and it lands on your acquirer, who passes it to you. Note what this means: the customer does not ask you first, and by the time you hear about it the money is already on its way back.

The flow, from your side of the counter

1. The dispute is raised. The cardholder contacts their bank, which files a chargeback with a reason code describing the claim.
2. Your provider debits you. The disputed amount is deducted from your settlement or balance, and many providers add a chargeback fee (£15 (Handepay) to £28 (Paymentsense) among those that publish one), which is usually charged whether or not you eventually win. Our hidden fees guide covers where this fee sits among the other charges on your statement.
3. You get a notification and a deadline. It states the amount, the reason code, what evidence is wanted, and the date by which you must respond. That date is the whole game: miss it and you lose by default.
4. You respond, or accept. Accepting ends it, and the customer keeps the money. Responding (called representment) sends your evidence back through the scheme for a decision.
5. Decision. If your defence succeeds, the disputed amount is returned to you. The chargeback fee usually is not. If it fails, the money stays with the cardholder.

Chargeback fees by provider

Each figure below is the provider’s own, from its pricing page, help centre or terms, checked on the date shown. Where a provider does not publish a fee, the table says so rather than guessing.

Big acquirers such as Worldpay, Barclaycard and Lloyds Cardnet price per business, so the fee sits on your own fee schedule. Look for a line called chargeback, retrieval or dispute fee; our guide to reading a merchant statement shows where. Reviews with the full fee lists: Paymentsense, Handepay, Tide, myPOS.

Chargeback time limits, from the primary sources

• The cardholder: UK Finance says a chargeback claim must be made within a set time period, typically 120 days from the date of purchase, and that longer periods may apply in some cases (UK Finance, FAQs: Chargeback rights and Section 75). The FCA puts it the same way and adds that for goods or services not provided, the 120 days normally run from the expected delivery date (FCA finalised guidance, Cancellations and refunds, October 2020 (para 1.7)).
• You: Visa says each step in the dispute process has a strict deadline, a missed response window can mean the case is automatically lost even when the evidence is strong, and merchants should check the timelines with their acquirer (Visa, Dispute Management Guide for Merchants, October 2026). Square publishes its own window: 7 days from the first notification email.
• Escalation on Mastercard: Mastercard chargebacks are a two-cycle process: the issuer’s chargeback, then the acquirer’s second presentment (your defence). If the issuer escalates to pre-arbitration and the acquirer takes no action for 30 calendar days, the acquirer takes financial responsibility and the funds move automatically. At arbitration the acquirer’s case is rejected automatically after 10 calendar days of no action (Mastercard, Chargebacks Made Simple Guide, September 2023).

The practical reading: a customer can come back months after the sale, but once the notification lands you have days. Open every chargeback email the day it arrives.

Chargeback reasons: the scheme categories

Every chargeback carries a reason code, and the code decides what evidence can win. Visa groups its dispute conditions into four categories, and Mastercard into four of its own:

Two Visa rules matter most at a card machine. First, if a chip card is swiped or key-entered instead of read by the chip, liability for counterfeit fraud may shift to you, even if the payment was approved at the time (condition 10.1): always let the chip read rather than swiping or keying a card that has one. Second, on phone and online sales: For card-absent fraud disputes (condition 10.4), Visa’s Compelling Evidence 3.0 can count at least two earlier undisputed payments on the same card, made within 365 days before the disputed one and more than 120 days before the dispute, with matching device, IP address or delivery details. If you take payments by phone, our virtual terminal guide covers the checks to run on every keyed payment.

Chargeback, refund or Section 75?

Customers mix these up, and the difference changes what you owe. A refund is your choice and costs the sale amount. A chargeback is forced through the cardholder’s bank, costs the sale amount plus any fee, and counts against your dispute rate. Chargeback is not a statutory right (FCA). UK Finance calls it an industry scheme, with outcomes shaped by the scheme rules under which the card is issued, the supplier’s terms and the card issuer’s approach. Section 75 is different again. Section 75 of the Consumer Credit Act 1974 is a legal right on credit card purchases costing over £100 and not more than £30,000, where the supplier misrepresented something or breached the contract (UK Finance). Under Section 75 the claim is against the card provider, which can then pursue the merchant, so the end result for you can look much the same.

How to respond with evidence

Match the evidence to the claim, because a beautiful bundle that ignores the reason code loses to three relevant documents that address it.

• “Fraud” or “I did not authorise this” on a card-present sale: the transaction receipt showing chip and PIN or contactless. The card, or a device carrying it, was physically present and verified, which is the strongest position a merchant can hold.
• “Goods or services not received”: proof of delivery or collection, a signed job sheet, a booking the customer attended, CCTV-corroborated collection if you have it, or correspondence showing the service was performed.
• “Not as described” or quality claims: the itemised receipt, your displayed refund policy, photographs, and any exchange with the customer where you offered to put it right.
• “Duplicate” or wrong amount: your till record or transaction log showing the sales are distinct, or that the amount matches the receipt.

Send it through the channel the notification specifies, before the deadline, and keep a copy of everything. Time limits in the dispute system are scheme-set, vary by network and reason code, and are short; the only safe assumption is that the date printed on your notification is real and unmovable.

The arithmetic of fighting versus refunding

Run the numbers before you run the defence. Take a disputed £20 sale on Paymentsense, whose published chargeback fee is £28. If you fight and win, the £20 comes back but you typically still pay the £28, so the dispute has cost you £28 and an hour of paperwork. If you fight and lose, you are down £20 + £28 = £48 plus the hour. If the customer had come to you first and you had simply refunded, you would be down £20 and no fee, with a customer who might come back. Now run the same numbers on a £600 sale with solid delivery evidence: winning keeps £600 against a fee of £15 (Handepay) to £28, which is worth the hour. On Square, which charges no dispute fee, the same win costs you nothing but time. The rule that falls out: refund small and weak, fight large and strong, and make it easy for unhappy customers to reach you before their bank, because a refund conversation is always cheaper than a dispute.

Preventing chargebacks in the first place

• Fix your billing descriptor. A statement line reading a holding-company name your customers have never heard of is the single most preventable cause of “I do not recognise this payment”. Ask your provider what your descriptor says and change it to your trading name.
• Give receipts, itemised where you can. A customer holding a receipt rarely disputes the amount, and the receipt is your evidence if they do.
• Keep proof of handover. Delivery confirmations, signed job sheets, collection signatures. For tradespeople, a dated photo of completed work alongside the invoice does real work in a dispute.
• Display your refund policy at the till and on receipts, and honour it quickly. Banks ask disputing customers whether they contacted the merchant first; being easy to reach wins you the dispute before it exists.
• Void duplicates on the spot. If a payment double-charges in a signal drop, reverse it immediately and tell the customer, rather than waiting for their statement to tell them. Our guide to customers charged when the terminal said declined covers that specific mess.

The honest part: chargebacks and account holds

Providers do not just process chargebacks, they measure them. Acquirers watch each merchant’s dispute rate because the schemes hold the acquirer responsible for merchants whose disputes run high, and the expected level is a small fraction of one percent of transactions. A merchant who drifts above the norm can meet consequences that arrive with little warning: higher fees, settlements held back, a rolling reserve, or in the worst case a terminated account, which other acquirers can see. If your takings have already stopped arriving on time, our guide to card machine money not reaching your bank explains the difference between a settlement delay and a genuine hold, and what to ask your provider. The point of this section is not to alarm: a typical shop or cafe with a handful of disputes a year is nowhere near any threshold. It is to make the priority clear: preventing the next five chargebacks matters more than winning the last one.

Frequently asked questions

Related reading

• Customer charged but payment declined: what actually happened
• Card machine money not in your bank? Settlement delays and holds
• Hidden card machine fees: the full list
• How to complain about your card machine provider
• How to read your merchant statement