Chargebacks occur when a customer questions a transaction to their card issuing bank. Often a bank will reverse a whole group of transactions when a single fraudulent transaction is found. Sometimes the customer just doesn’t remember the purchase and asks to have it reversed or is some rare instances a customer may be trying to pull a fast one.
The processor is supposed to send a notice to the merchant when this happens with a deadline for providing proof of the transaction which would include the merchant copy of the transaction receipt as well as any supporting documents like contracts or sales receipts, a good reason to keep these on file by date for easy access.
Most processors only charge a fee if the transaction proves to be unsubstantiated ranging from $25 to $50, however at least one charges a $25 fee just because you receive a chargeback notice regardless of whether it is proven correct or not (plus an additional fee if it is not).
If you receive such a notice be sure to replay ASAP and keep a record of your response as well as the date the notice is received. A client recently received a notice of a chargeback after the reply deadline. The transaction was proven to be legitimate and we had to go to some effort to get the funds returned to the merchants account as well as the fee for the chargeback. Fortunately the client had maintained good records.