Whenever a Customer is not happy with the goods or services received from the Merchant, after trying to resolve the issue with the Merchant, as a last resort he/she can contact the Issuer to redeem the funds. In its turn, the Issuer can grant a Credit to the Customer.
Merchants can incur substantial costs for Chargebacks as it is a costly process for all parties involved. Hence, fees charged for Chargebacks often reflect it and are relatively high. The Card Networks have strict rules about Chargeback management which all participants must adhere to. In cases where Merchant receives too many chargeback requests, it will no longer be given permission to accept Credit Cards. It is always advantageous for a Merchant to issue Refund instead of a Chargeback.