How does the chargeback process work?

When a customer complaint about a particular credit card transaction is registered, the issuing bank will usually send a Retrieval Request to your credit card processing company. Your credit card processor will then send it on to your merchant services account. There are some cases in which a chargeback is automatically sent before the retrieval request, but again, that is rare. The retrieval request gives the merchant the opportunity, without being charged, to prove that goods and services were delivered. The best way that a merchant can prove that the customer has made a mistake is by presenting a signed credit card sales draft. If the merchant can produce the authorized signature then the complaint is usually dropped.
If the merchant is not able to prove that the credit card transaction is legitimate, then a chargeback is issued. The card association/issuing bank takes the credit card transaction amount out of the merchant's bank and credits the customer's credit card account. All charge backs are put on record at the merchant's bank. They can severely damage a merchant services account if too many occur.
The only protection that the credit card processing company offers the merchant services account against charge backs is a notification of suspicious charges to a particular credit card. If the same amount has been charged to one credit card several times in a row, the credit card processor will not go ahead with the credit card authorization. The merchant services account will always be notified of such a situation. Because of the way in which the credit card processing system is set up, the merchant services account must be committed to doing all that is necessary to prevent questions of trust arising when a credit card transaction has taken place. In other words, it is the merchant's responsibility to protect themselves against charge backs and/or fraudulent credit card users.

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