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A settlement arrives lower than expected because the gateway has debited a disputed card payment, and the business does not know how long it has to respond or how to book the deduction.
A chargeback is started by the card-issuing bank. The gateway debits the amount at once, the merchant sends proof within a short window, and the result either credits the amount back in a later settlement or makes the loss final.
A chargeback tracker with order ID, payment ID, amount debited, settlement date of debit, reason given, reply deadline, reply date, outcome and settlement date of any credit back.
Every chargeback is answered before the deadline, the disputed amount sits in its own account until decided, and wins are matched to their credit-back line in a later settlement.
A chargeback is the customer’s bank forcing a card payment back. The gateway usually debits the amount from your settlement as soon as the dispute is raised, then gives you a short window to send proof. If you win, the money comes back in a later settlement; if you lose or do not reply, the debit stands.
Chargeback, refund or reversal: what is the difference?
These three words get mixed up. They behave differently in your settlement.
| Chargeback | Refund | Reversal | |
|---|---|---|---|
| Who starts it | Customer’s card-issuing bank, after a complaint | You, the merchant | Gateway or bank, when a payment fails or is cancelled before settlement |
| Who decides | Card network rules, based on evidence | You | Automatic |
| Effect on settlement | Amount debited from a settlement | Amount netted from the next settlement | Never settled, or adjusted |
| Deadline | Short reply window on the notice | None, but act quickly | Not applicable |
| Fee | Some gateways charge a dispute fee | Fee on the original payment may or may not be reversed | Usually none |
The key point: a refund is your decision. A chargeback is not. That is why a customer who could not get a refund quickly sometimes goes to their bank instead.
How long do I have to respond and what proof counts?
The deadline is printed on the dispute notice from the gateway. It is typically a few working days to about a week. Gateways set it shorter than the card network’s own deadline so that they have time to pass your proof on. Missing it usually means you lose by default.
Proof should answer the reason given:
- “Goods not received”: courier proof of delivery with date, OTP or signature, and tracking ID.
- “Not as described”: product page, invoice, photos at dispatch, and any customer message accepting the goods.
- “Not authorised”: OTP or 3D Secure confirmation from the gateway, delivery address matching the cardholder’s past orders, and IP or device records if you have them.
- “Cancelled or refunded already”: the refund ID and the settlement line showing the refund.
Send clear PDFs, one per point, with the order ID on each.
Why is there a separate dispute fee next to the disputed amount?
Some gateways charge a fixed fee for handling each dispute, plus GST on that fee. It appears as its own line in the settlement report, next to the disputed amount. Whether it is charged, and whether it is returned if you win, depends on your merchant agreement, so read the fee schedule. Book it as a payment-processing expense, not as part of the disputed amount.
Worked example: a ₹6,800 disputed order
A customer buys a ₹6,800 jacket by card. Ten days later the customer tells their bank the parcel never arrived.
| Day | Event | Effect |
|---|---|---|
| Day 0 (Tuesday) | Dispute notice; ₹6,800 debited from Tuesday’s settlement | Tuesday’s ₹52,000 net payout arrives as ₹45,200 (₹52,000 − ₹6,800) |
| Day 5 | Merchant replies with courier proof of delivery and OTP | Nothing changes yet |
| Later | Dispute decided in merchant’s favour | ₹6,800 credited back in a later settlement |
In the books on Day 0, the ₹6,800 moves from “gateway receivable” to “chargebacks under dispute”. The sale is not reversed. When the ₹6,800 comes back, it clears the dispute account. If the dispute had been lost, the ₹6,800 would be reversed against the sale or written off, as your accountant advises.
How do I stop chargebacks piling up?
- Refund quickly when a customer complains. A fast refund is cheaper than a dispute.
- Use a billing name the customer will recognise on their card statement.
- Keep delivery proof for every order for at least the dispute period.
- Track each dispute in one sheet: order, amount, debit date, deadline, reply date, outcome.
What does a month of disputes look like?
Take a shop with 1,000 card orders a month at an average of ₹1,800, or ₹18,00,000 of sales. Three customers raise disputes, so ₹5,400 is debited across that month’s settlements. The shop replies to all three on time and wins two, so ₹3,600 comes back in later settlements and ₹1,800 is lost. Without a tracker, the ₹3,600 credit arriving weeks later looks like a mystery receipt.
What to read next
- Chargeback reconciliation in India: tracking each dispute from deduction to outcome.
- Chargeback dispute reconciliation for payment gateways: matching dispute lines in settlement reports.
- Payment gateway reconciliation: the full process.
Payment-gateway settlement reconciliation is on the TransactIG roadmap.
Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →