CHARGEBACKS VS REFUNDS: WHAT’S THE DIFFERENCE AND WHY IT MATTERS

CHARGEBACKS VS REFUNDS: WHAT’S THE DIFFERENCE AND WHY IT MATTERS

Did you know that confusing billing descriptors lead to over £128 million in chargebacks annually for UK merchants? That’s a staggering loss - especially when many of those chargebacks could be prevented with clearer communication and better transaction transparency.

Whether you're running a startup or a growing e-commerce brand, understanding how refunds and chargebacks differ isn't just useful - it could protect your business.

Let’s break it down in plain English: what refunds and chargebacks actually are, how they work in the UK, and what you should do when they appear in your business.

What Is a Refund?

A refund is the most straightforward option. It happens when a customer contacts you - the business - directly and asks for their money back. Maybe the item was faulty, didn’t arrive, or they simply changed their mind and your policy allows it.

Key facts:

What Is a Chargeback?

A chargeback occurs when the customer skips contacting you and instead goes straight to their bank. They ask the bank to reverse the charge due to issues like unauthorised transactions, non-delivery, or item mismatch.

Key facts:

Chargeback vs Refund: The Main Differences

Aspect

Refund

Chargeback

Who starts it?

Customer contacts merchant

Customer contacts bank

Who controls it?

You do

The bank/card issuer

Time to resolve

A few days

Weeks to months

Cost to business

Minimal

Refund amount + fees + potential penalties

Risk to reputation

Low

High if frequent

What UK Businesses Should Watch Out For

If you run a UK business, especially online, chargebacks can catch you off-guard. Many are triggered by issues that could've been resolved with a quick response or a visible refund policy.

Tips to protect your business:

Final Thoughts

Chargebacks and refunds might seem similar, but they’re vastly different behind the scenes. Refunds are faster, cheaper, and easier to manage. Chargebacks, while necessary in some cases, can damage your business if mishandled.

For UK merchants - especially SMEs -being proactive can significantly reduce losses and safeguard customer relationships. Invest in clear communication, accurate billing descriptors, and transparent service. It could save you more than just money.

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