Guide to Chargebacks

As a merchant, you may occasionally receive chargeback requests. See how you can help to reduce chargebacks and make sure they’re not due to fraud.

What happens in a chargeback?

A chargeback is a refund of a debit or credit card transaction made by the cardholder, and usually occurs when the cardholder raises a dispute with their card issuer (e.g. their bank, financial institution or credit provider) in relation to a purchase made with their debit or credit card.

 

The reasons why chargebacks occur vary; however, are generally the result of the cardholder being dissatisfied with their purchase or due to unauthorised or fraudulent activity or use of their card. If the cardholder notices a transaction on their debit or credit card for a payment that they didn’t make, or where they were charged an incorrect amount or were charged twice, they can dispute that transaction with their card issuer. There are many reasons why chargebacks occur, and the cardholder’s card issuer can initiate a chargeback for:

  •  goods or services not received
  • goods or services received not as described or defective
  • appropriate transaction authorisation was not obtained
  • cancelled recurring transactions
  • fraudulent transactions
  • processing errors.

 

If the card issuer finds the dispute is valid, it must follow a detailed chargeback process before the disputed transaction can be reversed from your merchant facility bank account and refunded to the cardholder.

 

If the chargeback is deemed valid, you won’t get paid for the goods and services originally provided by you and you may incur additional chargeback fees.

How does the chargeback process work?

Step 1

Step 1. A dispute is raised by a cardholder.

The cardholder may see a transaction on their statement that they don’t recognise or didn’t authorise and raise a dispute with their card issuer.

Step 2. The cardholder’s card issuer will issue a chargeback.

The cardholder’s card issuer will lodge a dispute through the relevant card scheme (typically Mastercard®, Visa®, UnionPay or eftpos), and the card scheme will, in turn, raise a chargeback with Westpac.

Step 3. We’ll contact you and ask for some information.

We will notify you (via a letter and/or email), to let you know that one of your transactions has been disputed. In the notification, we may request some information about the transaction from you, which may include:
 

  • terms and conditions of the initial sale
  • the order form, invoice or other sales record
  • a signed delivery receipt or another confirmation of delivery
  • correspondence (if any) from the cardholder.


We may also request additional supporting documents as evidence. Always respond promptly within the timeframes specified in your chargeback notification.

 

A condition of your merchant facility is to provide Westpac with a valid email address. To ensure we can contact you promptly, please keep your contact details, including your email address and phone number up to date.  

 

To update your merchant facility details, please complete the Change your address form (PDF 756KB), available on our Merchant Forms page or contact our Merchant Helpdesk on 1800 029 749 (available 24/7).

Step 4. The dispute will be assessed.

Once we have gathered all the necessary information about the transaction, we’ll evaluate whether we have enough evidence to challenge the chargeback. If we do, then we will submit all the relevant information you provided to the card scheme. The card scheme will then make the final decision.

If you disagree with the assessment or outcome of the chargeback, you can contact our Merchant Chargebacks team on 1800 029 749 (8am to 4:30pm Sydney time) or by email at merchantchargebacks@westpac.com.au. You'll need to provide additional evidence to support your dispute. Refer to the information types set out in Step 3.

Step 5. An outcome will be reached.

There are two possible outcomes from the assessment:

  1. The chargeback is ruled in favour of the cardholder – If the request is determined as being valid, the transaction amount will be debited from your merchant facility bank account and a chargeback fee may be applied.
  2. The chargeback is ruled in your favour – If the card schemes determines the chargeback is not valid, no debit will be passed onto you and no chargeback fee will be applied to your merchant facility bank account..

What about chargebacks related to fraud?

A card issuer can initiate a fraud chargeback on a transaction for various reasons, such as:

  • The transaction is illegal or prohibited
  • The cardholder did not authorise the transaction
  • The cardholder says they are not liable for the transaction
  • Authorisation for the transaction was declined.


The process for fraud-related chargebacks is slightly different to the typical chargeback process. 

 

Step 1. We’ll notify you (via a letter and/or email) that your merchant facility bank account has been debited. 

Step 2. You’ll have a chance to dispute the fraudulent chargeback by following the process outlined in the notification.

A condition of your merchant facility is to provide Westpac with a valid email address. To ensure we can contact you promptly, please keep your contact details, including your email address and phone number up to date.

 

To update your merchant facility details, please complete the Change your address form (PDF 756KB), available on our Merchant Forms page or contact our Merchant Helpdesk on 1800 029 749 (available 24/7).

Why do chargebacks occur?

Here are some of the common reasons for chargebacks.
 

  • A cardholder doesn’t recognise the transaction
  • A transaction was fraudulent
  • A transaction was processed more than once
  • The incorrect amount was charged
  • The goods or services haven't been received 
  • A credit or refund was not processed 
  • The transaction amount was above your floor limit, but no authorisation was obtained
  • The cardholder’s card number was not valid
  • The service/merchandise received was not as described
  • Additional charges are not recognised.

How can I prevent chargebacks?

Here are a few things you can do to help reduce the risk of chargeback requests:

 

  • Comply with the terms of your merchant agreement. Always follow the terms of your merchant agreement for processing transactions and retain proof for all transactions.
  • Keep detailed records. Keep detailed records showing that the cardholder has received the goods and services they paid for.
  • Get a delivery receipt. Always deliver goods or services as advertised and get a confirmation that they were received by the actual cardholder.
  • Reduce refund fraud. Only refund to the original card that was used to make the purchase. Do not issue refunds in cash or electronic funds transfer for card transactions.
  • Use a familiar name. Use a business or company name that is familiar to your customers and consistent with the name on your transaction receipts.
  • Promptly resolve disputes. Be proactive and communicate clearly with your customers when there's an issue.

 

Frequently asked questions

Why shouldn't I just refund the cardholder?

If a chargeback case has been raised against your business, do not process a refund to the cardholder. If you process a refund during the time a chargeback case is open, you may still be liable for the chargeback. After the case is reviewed, if a refund is required, it will be processed through the chargeback process.


A debit or credit card is issued by a card issuer (e.g. a bank, financial institution or credit provider), but the card schemes like Visa, Mastercard, UnionPay and eftpos set the rules around chargebacks. The card schemes issue chargeback rules for merchants, cardholders, and card issuers to ensure that chargeback processes are applied consistently. The card schemes outline the chargebacks that are automatic and the ones you can dispute.

 

Some chargebacks can be challenged. It’s important to familiarise yourself with the chargeback guidelines set out by the schemes. If you are unable to provide satisfactory evidence to challenge the chargeback, the dispute may become an automatic chargeback and your merchantfacility bank account may be automatically debited.

 

If you'd like to challenge a chargeback, please contact our Merchant Chargebacks team on 1800 029 749 (8am to 4:30pm Sydney time) or by email at merchantchargebacks@westpac.com.au.

We understand it can be frustrating for your merchant facility bank account to be debited before a case is decided, but we need to ensure that funds are available if the chargeback is decided in the cardholder’s favour. Should the case be resolved in your favour, the funds will be returned to your merchant facility bank account, as per the original transaction.

Be careful when processing manually keyed transactions for online and Mail Order and Telephone orders (also known as MOTO). These transactions carry a higher chargeback risk and are prone to fraud because it is difficult for the merchants to verify the cardholder’s identity.

Fraudsters often exploit this vulnerability by using stolen cards or using stolen card numbers and claiming that the original card is 'damaged’. Learn more about how to avoid and respond to fraud and scams.

We'll send you a letter and/or email to notify you of a chargeback. We need to be able to contact you during the process, so please make sure all your contact details, including your email address and phone number are up to date.

 

A condition of your merchant facility is to provide Westpac with a valid email address. To ensure we can contact you promptly, please keep your contact details, including your email address and phone number up to date.

 

To update your merchant facility details, please complete the Change your address form (PDF 756KB), available on our Merchant Forms  page or contact our Merchant Helpdesk on 1800 029 749 (available 24/7).

The card schemes like Visa and Mastercard recommend that you keep your merchant receipts for up to 540 days (about 18 months) from the date of purchase.  Your merchant receipts can be maintained in physical or electronic form or both.

 

However, for general tax purposes, merchants will need to keep their receipts for a longer period. You can refer to the Australian Taxation Office (ATO) for more details. 

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