What is the difference between Chargebacks & Refunds?
Most buyers don’t know the difference between a refund and cashback and often use it interchangeably. But there is a big difference between the terms and only knowledgeable traders know which is the lesser of two evils. In this article, we highlight the difference between a refund and chargeback by comparing these terms separately. Keep scrolling to read more information.
What is a chargeback?
This is a special type of payment, where if the buyer is not satisfied with the product and wants to return the payment, he should involve his bank that issued the card. If the buyer does not recognize a specific transaction, he can ask the bank for a chargeback. The chargeback dispute does not directly concern the merchant, and the right to chargeback is defined by the bank that issued the card. In most cases, the bank does not need much time to return the money and the investigation will start soon. The merchant also has the right to challenge the chargeback by presenting proof and evidence of the legitimacy of the transaction and properly providing its services and goods.
Chargeback will occur in the following cases –
- The buyer tried to contact the seller for a refund, but did not receive the refund.
- The seller offered low quality services or products.
- The buyer placed many orders unintentionally.
- The seller did not offer the service or products for a fee.
- The cardholder does not recognize any specific transaction.
- Buyer cancels subscription, but recurring charges are included.
What is a refund?
A refund is a specific type of payment returned by a seller to a buyer that was originally used to purchase goods or services by the buyer. The buyer will ask the seller for a refund if he is not satisfied with the services and that the payment can be partial or full. These payments are a little easier than chargeback. The buyer can request a refund if the item is damaged, they no longer need the product, they bought it by mistake or the delivery time is too late. Sellers have the right to set specific refund policies that do not apply to chargebacks. They may return certain items within a certain deadline, but a customer-friendly return policy will allow you to build a strong customer base.
Refunds can be requested in the following cases:
- A buyer buys products or services from a merchant.
- If the customer is not satisfied with the quality, they can contact the seller and ask for a refund.
- The seller accepts refunds.
There is little difference between a refund and a cashback. Chargeback primarily involves time, money and resources. The main difference lies in the way the cardholder accepts payment. Another difference between the two is the fees, as merchants lose income in both of the situations. Refunds do not cost any additional fees or charges, but chargebacks do include additional fees. Banks charge these additional fees to cover the cost of managing the process between merchants and sellers. Refunds can be initiated immediately compared to chargebacks. A few mouse clicks can initiate a refund, while a chargeback can take several months.
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