A chargeback is the reversal of a card payment that happens when a cardholder disputes a transaction with their bank and the dispute is decided in the cardholder's favor. The money is returned to the cardholder and withdrawn from the merchant's account. In affiliate programs, a charged-back sale or deposit normally means the related commission is reversed as well.
How it works
- The cardholder disputes a charge with their card issuer, for example as unauthorized or as goods not received.
- The merchant is asked for supporting evidence and can contest the dispute (representment).
- The issuing bank reviews the case and decides whether to reverse the payment.
Visa's merchant guide to chargebacks lists the common causes: genuine fraud, "friendly fraud" by customers reversing legitimate purchases, authorization and processing errors, and customer disputes. Because the process involves several parties, a chargeback can land weeks after the original payment.
Example
Example: a fintech program pays a $100 CPA per funded account. Ten accounts from one affiliate are funded with stolen cards and charged back 45 days later. With a 30-day hold period those commissions were already paid and must be clawed back; with a 60-day hold they would have been rejected before payout.
Why it matters
- Brands lose the revenue, pay dispute fees, and a high chargeback ratio can put their merchant account at risk with their payment processor. Affiliate fraud, such as stolen-card sign-ups made to trigger CPA payouts, can raise that ratio quickly.
- Affiliates should check how the agreement treats chargebacks: whether only fraud-related chargebacks are reversed, or every chargeback, including ones caused by the brand's own service problems.
Match the hold period to how long chargebacks typically take to appear in your vertical, and monitor chargebacks per affiliate alongside the fraud score of their clicks. More detection methods are covered in affiliate fraud detection.
Related: commission reversal, hold period, fraud score, FTD.