Chargeback vs. Refund: What's the Difference?

[Suba]

In the business world, we often encounter chargebacks and refunds, which can be confusing for many people. Both involve refunds to customers, with the goal of increasing customer satisfaction. When I buy something on a marketplace, the item I ordered and paid for never arrives, and I end up opening the app and being asked to withdraw funds.

On the other hand, besides credit/debit cards, many payment processors also offer chargebacks, such as PayPal, Shopify Payments, Stripe, and others. Several years ago, crypto sellers were reluctant to accept payments through PayPal due to the risk of chargebacks, where crypto has been sent but not confirmed, but the buyer requests a chargeback. This would result in the buyer receiving the crypto for free.

If we examine it closely, there are several key differences between chargebacks and refunds, including initiative, cost, resolution time, and negative impact. Can you explain the difference between a refund and a chargeback?

 

[gwolf666]

From my experience, I believe the main difference between a refund and a chargeback lies in who initiates the process and the implications involved. A refund is generally a decision made by the seller or merchant when, for some reason, the customer doesn't receive the product, the product is defective, or there's another legitimate issue. It's a solution agreed upon by both parties and is usually simpler and faster to manage. In contrast, a chargeback is initiated by the customer through their bank or payment processor if they believe they didn't receive the product, were charged incorrectly, or that fraud occurred. Chargebacks tend to be more costly for merchants, as they involve administrative fees and, in some cases, can damage the business's reputation. Furthermore, chargebacks can be used fraudulently in some cases, such as with cryptocurrency purchases, which creates greater risk and complications.

 

[Augusta]

Refund, is when merchant gives the customer the money back directly after the return or exchange of a product or report of dissatisfaction with a service. For chargebacks, the consumer receives credit from his or her card issuer.