What is a reversal transaction?

Reversal transaction or chargeback can be defined as the claim made by the cardholder to his issuing bank against a merchant number.

Reversal transaction is also known as chargeback and its objective is to recover the total or partial amount of money that the client has paid for a service or product. There are several types of reversal transactions according to their nature:

Legitimate transaction reversals: Take place when a cardholder files a claim to the issuing bank against the merchant number and argues that the product or service that he has purchased has not been delivered. This type of legitimate transaction reversal occurs when the merchant has forgotten to process your order or has had an oversight without intending to commit any fraud. As a solution, the merchant sends the product again or returns the money to his client.

Illegitimate transaction reversals: Take place when the cardholder files a claim to the issuing bank against the merchant number and claims that the merchant did not deliver a product or service that the client has paid for. In this case the merchant intends to commit fraud against the cardholder and therefore runs a risk to lose his contract with Payment processing service provider. 

Fraudulent transaction reversals: Take place when the cardholder files a claim to the issuing bank against the merchant number and argues that the product or service he paid for has not been provided, when in reality the merchant complied with all the requirements and sent the product. In this case, the cardholder wants his purchase to come out for free recovering the money he paid and keeping the product at the same time. This type of fraudulent transaction reversals is the most common one and the merchant will have to protect himself keeping all the evidence (emails, telephone recordings etc.) to invalidate the chargeback. 

Filing reversal transaction is legal as long as the cardholder is honest. In case you are a victim of fraudulent commercial activity, please contact your bank and file a transaction reversal.