Using payment cards for your business

Your liability for disputed card payments


Chargebacks can occur when a customer disputes a card transaction. Your bank can transfer liability to you and reclaim the value of the transaction from your account.

Chargebacks can be made where there has been:

  • fraud - for instance, where a transaction has been made with a stolen card or account number
  • inadequate customer service - for instance, if a customer did not receive their order or the goods were defective

Even if a transaction has been authorised and has been authenticated with a PIN it does not prevent all types of chargeback. A chargeback can be made up to 120 days after the transaction has been debited or from when the goods or services were due to be received.

Your customers' key statutory rights in relation to the goods and services you provide remain the same whichever payment method is used.

To minimise chargebacks you must verify the identity of people making card payments. In face-to-face transactions the customer's PIN or, where a PIN cannot be used, signature is the most important security measure. If a PIN verified transaction is authorised through your terminal, you won't be liable for a chargeback unless the goods or service are not as described or are faulty. Where you cannot accept a PIN, a clear signature will help but is no guarantee against a chargeback.

Customer/card-not-present transactions - such as internet, mail order or phone transactions - present a greater risk because it is more difficult to verify the customer's identity. You therefore face a greater risk of fraud and the resulting chargebacks.

For advice on protecting your business from payment card fraud, see payment card security measures.