Chargeback: Meaning in a Merchant Cash Advance
A chargeback is a reversal of a card payment that a customer disputes through their card issuer. The money comes back out of the business's merchant account, usually with a fee, while the dispute is decided.
What does chargeback mean?
A customer calls their bank and says they didn't authorize a charge, never got the product or were charged the wrong amount. The bank takes the money back from your processor, and your processor takes it back from you. You can respond with receipts, tracking or signed paperwork, and if the evidence holds up, the money returns.
Why does chargeback matter to your business?
Funders read chargebacks as both lost revenue and a risk signal. A high chargeback rate can get a merchant account placed on hold or closed, which cuts off deposits. On a split processing advance, the funder's share is based on settled sales, so a burst of chargebacks also affects how quickly the advance is repaid.
How do you keep chargebacks down?
- Use a clear business name customers will recognize on their card statement.
- Send receipts and tracking automatically.
- Answer every dispute before the deadline with specific evidence.
What do funders ask about chargebacks?
Expect questions if chargebacks jump in a recent month. A short explanation, like a shipping problem that has been fixed, helps an underwriter read the numbers fairly.
What is friendly fraud?
Some chargebacks come from customers who did buy the product but dispute the charge anyway. Good records, clear refund policies and signed delivery receipts win many of these disputes, and every one you win comes back into revenue.
Where will you see it?
On processing statements, listed with a reason code and fee. On bank statements as smaller deposits or separate debits. In your processor dashboard, where each dispute shows its deadline.
Which terms are related to chargeback?
The full list is in the glossary. Owners ask about this in Do cash deposits count toward an MCA?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.