What is the difference between refunds and chargebacks?

This article explains the difference between refunds and chargebacks and how Cleeng manages both processes under the Merchant model.

Overview

Refunds and chargebacks both result in money being returned to the customer, but they differ in who initiates the process and how the case is handled.

• Refunds: Initiated as a return of funds for a purchase.
• Chargebacks: Initiated as a transaction dispute through the customer’s bank.

Refunds

A refund is the return of money to the customer for a valid transaction. Reasons for a refund may include:

• The product or service did not meet expectations.
• The product or service was not delivered as described.

Under the Merchant model, Cleeng processes refund requests by instructing the payment provider to return the funds to the customer. The payment provider executes the transfer.

Chargebacks

A chargeback occurs when a customer disputes a transaction with their bank or card issuer. Common reasons include:

• The customer believes the transaction was unauthorized.
• The customer claims an issue with the service was not resolved.

When a chargeback is filed, the bank immediately withdraws the funds from Cleeng’s account and temporarily returns them to the customer.

Cleeng then manages the dispute:

1. Reviews the chargeback claim.
2. Collects and submits evidence if the claim is believed to be invalid.
3. Waits for the issuer or payment scheme to make the final decision.

This ensures that fraudulent or invalid claims can be contested.

How does Cleeng charge for Refunds and Chargebacks?

If you use the Merchant model, Cleeng manages refunds and chargebacks directly with the payment providers and schemes. For each operation, a small reverse fee applies.

There are no other costs for these operations. Cleeng covers:

• Processing of refunds through the payment provider
• Dispute management for chargebacks
• Bank escalations
• Scheme fees

The only exception is if penalties are imposed directly by payment schemes due to excessive chargebacks linked to your account.

Related content

How to avoid chargebacks?

Cleeng Hi5 Standard Refund Policy