A chargeback occurs when a cardholder disputes a transaction on their account. When this happens, the bank that issued the credit card investigates the matter on behalf of the cardholder. Upon discovery of a fraudulent transaction, the issuing bank returns the funds to the cardholder. If a merchant cannot prove that the transaction is legit, the processor will charge a fee (chargeback fee) and subtract the amount of the transaction in question from the merchant’s bank account.