Any merchant that accepts credit card payments is susceptible to various types of card fraud, particularly chargeback fraud.

You would be foolish not to take chargebacks seriously.

• Fraudsters target eCommerce merchants on purpose
• Chargeback fraud costs merchants more than 3.5x their initial loss
• 1 in 4 digital transactions is a fraud attempt

By the end of this chargeback prevention guide, you will learn the 10 proven ways that 9-figure merchants use to avoid chargebacks reliably and how to implement them for your store.

Ready? Let’s go.

Understanding Chargeback Fraud

Chargeback fraud is a type of payment fraud that occurs when a customer disputes a legitimate transaction with their credit card company, resulting in a forced reversal of the transaction. This fraudulent activity can have serious consequences for businesses, including lost revenue, damage to their reputation, and increased chargeback fees. When a chargeback is initiated, the business not only loses the sale but also incurs additional costs associated with the chargeback process.

Why Chargebacks Happen in the First Place

Before we talk about preventing chargebacks, we need to clarify where the responsibility lies. The following table clarifies different types of chargeback requests and why they happen:

Essentially, chargebacks therefore fall into one of three categories:

• Chargebacks that are your fault due to poor user experience
• Chargebacks that are caused by criminal fraud
• Chargebacks that are on customers claiming illegitimate chargebacks

Stop chargebacks before they happen with Chargeflow Alerts. Be notified instantly when disputes are filed and take corrective action before they escalate. Fully automated and hands-off, it works with all major card companies and platforms like Shopify, Stripe, and PayPal.

Set up chargeback alerts in 2 minutes

Lower dispute rates by up to 90%

Read next:

• Top Reasons Why Customers File a Chargeback
• Chargeflow Alerts vs. Traditional Chargeback Alerts

1) How to fight chargeback fraud ("friendly fraud" chargebacks)

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Friendly fraud, often referred to as chargeback abuse, occurs when legitimate customers dispute transactions with their bank, either due to confusion, forgetfulness, or intentional misuse of the chargeback process. Customer claims, such as asserting they did not authorize a purchase or received faulty items can lead to chargebacks.

What is a Fraudulent Chargeback?

A fraudulent chargeback occurs when a customer illegitimately disputes a valid transaction to obtain a refund while keeping the product or service. This can include false claims of unauthorized purchases, non-receipt of items, or defective goods. Fraudulent chargebacks harm merchants through lost revenue, penalties, and increased chargeback ratios.

To combat chargeback abuse effectively, businesses must focus on proper documentation and proactive measures. These include:

1.1) Clear Communication

• Send clear order confirmations and receipts
• Use recognizable billing descriptors
• Provide detailed shipping updates
• Communicate delivery delays promptly
• Send subscription renewal reminders

→ Prevents disputes from customers who don’t recognize charges or forget about subscriptions. With Chargeflow Alerts (fraud detection software), you’re notified the moment a customer contacts their bank, giving you a chance to resolve confusion before it becomes a chargeback.

1.2) Digital Proof

• Capture IP addresses and timestamps
• Record device information
• Save delivery confirmation signatures
• Document customer communication
• Keep proof of service delivery

→ Creates an evidence trail for fighting false claims. When disputes occur, refund promptly through Chargeflow’s automated system to avoid chargeback fees.

1.3) Policy Protection

• Display clear return policies
• Get subscription terms acceptance
• Document refund procedures
• Capture proof of policy agreement
• Make the cancellation process simple

→ Prevents disputes from buyer’s remorse and misunderstandings. Early dispute alerts help you identify patterns and address issues before they escalate.

Pro Tip: The key to fighting friendly fraud is speed. The faster you can reach out to a confused customer, the better your chances of preventing a chargeback. Chargeflow’s alert system helps businesses dispute fraudulent chargebacks by notifying you immediately when customers initiate disputes — it works with all major card companies.

Chargeflow Manages Disputes For You on Autopilot (Your Store Will Thank You)

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New disputes are pulled automatically: Chargeflow securely fetches new disputes and chargebacks in real-time from your connected payment processors.

2

ChargeScore® is calculated: Our system calculates the ChargeScore® for the dispute to estimate your success probability based on evidence strength and fraud analysis.

3

We generate a ChargeResponse®: Evidence is pulled from over 50 data points and optimized in real-time for your store type and dispute history.

4

We human-proof your ChargeResponse®: A Dispute Expert reviews the response to maximize recovery chances.

5

You win: No fixed fees! We only get paid when you recover your funds, so increasing your win rate is our mission.

Try ChargeFlow Free Today

4x ROI guarantee

$126M+ revenue recovered

Read more:

• Friendly Fraud: What It Is and How You Prevent It (2025 Guide)
• Chargeback Management: When to Fight and When to Forgive

2) How to prevent chargebacks from criminal fraud with chargeback fraud prevention

Criminal fraud is one of the most damaging types of chargebacks, often stemming from stolen card data, unauthorized purchases, or account takeovers. While platforms like Stripe, PayPal, and Shopify offer some built-in chargeback protection features, these are often reactive and may not fully safeguard your business from the financial and operational impact of fraud.

While you can't stop all fraudsters, you can significantly reduce criminal fraud with the right preventive measures:

2.1) Payment Authentication

• Implement 3D Secure 2.0 for added verification
• Use Address Verification Service (AVS)
• Require CVV for all transactions
• Enable strict card validation rules
• Set velocity limits on transactions

→ Prevents unauthorized purchases by adding extra layers of verification before transaction completion.

2.2) Suspicious Activity Monitoring

• Watch for multiple failed payment attempts
• Flag unusual order values or quantities
• Monitor IP addresses and locations
• Track devices used across transactions
• Identify unusual shipping/billing mismatches

→ Stops card testing attempts and catches fraudulent patterns before they become chargebacks.

2.3) High-Risk Order Management

• Review orders from high-risk countries
• Double-check large or unusual orders
• Verify orders with mismatched addresses
• Contact customers to confirm suspicious orders
• Document all verification attempts

→ Prevents fraudulent transactions by identifying and verifying high-risk orders. When disputes do occur, Chargeflow's ChargeScore® can help assess your chances of winning the case.

Remember: Balance security with customer experience. Too many restrictions can lead to cart abandonment, while too few can leave you vulnerable to fraud.

HexClad saved almost 200 hours on disputes with Chargeflow

See how Chargeflow helped HexClad prepare for holiday chargeback spikes. Chargeflow eliminated all the manual work HexClad invested in preparing dispute evidence and improved their win rates.

Improvement in recovery rate

59%

Hours Saved

199

Become Our Next Success Story 🚀

4x ROI guarantee

$126M+ revenue recovered

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Read next: How to Dispute a Chargeback: A Complete Guide for Merchants

3) How to Avoid Merchant Error Chargebacks

For businesses, chargebacks can result in financial losses, damage to their reputation, higher fees from payment processors, and even losing the ability to accept credit card payments. This category of chargebacks result from operational issues and are fully preventable.

So start by tracking chargeback data and analyzing your most common reason codes to identify patterns:

3.1) Service and Communication

• Make billing descriptors clear and recognizable (include your brand name and contact info)
• Set up real-time shipping notifications and tracking updates
• Create clear refund and return policies, displayed prominently on your site
• Respond to customer inquiries within 24 hours
• Document all customer interactions and support tickets

→ Prevents chargebacks due to unrecognized charges, shipping confusion, and policy misunderstandings that lead to “item not received” or “service not as described” claims. For automated tracking of these issues, Chargeflow’s system monitors over 50 data points in real time.

3.2) Product and Website

• Use high-quality product images from multiple angles
• Write detailed, accurate product descriptions
• Display shipping times and any potential delays upfront
• Keep inventory status updated in real-time
• Make pricing, terms, and conditions crystal clear

→ Prevents “product not as described,” “misleading merchant,” and “not as advertised” disputes by setting clear expectations before purchase.

3.3) Payment Processing

• Double-check transactions before processing
• Implement systems to prevent double-charging
• Process refunds promptly (within 1-3 business days)
• Use AVS and CVV verification
• Keep detailed transaction records

→ Prevents technical chargebacks like duplicate charges, delayed refunds, and processing errors that often trigger automatic disputes. Chargeflow’s ChargeResponse® system automatically compiles this evidence if disputes occur.

3.4) Fulfillment and Quality

• Inspect products before shipping
• Use quality packaging materials
• Include order details and return instructions in packages
• Implement quality control checks
• Track and resolve delivery issues proactively

→ Prevents disputes related to damaged items, wrong products shipped, and delivery issues that often result in “item not received” claims.

Pro Tip: Create a checklist of these items and audit your processes monthly. Regular reviews help catch issues before they become chargebacks.

Remember: Every merchant error chargeback is a learning opportunity. When you receive one, document the cause and update your processes to prevent similar issues in the future.

Read next:

• How to Write the Most Potent Chargeback Response
• The Ultimate Guide to Winning Chargeback Disputes

How does the chargeback process work for online merchants?

1. Customer Dispute: A customer disputes a transaction with their bank, citing reasons like unauthorized charges or non-delivery.
2. Temporary Reversal: The bank temporarily reverses the payment, debiting the merchant’s account (Read next: Handling Transaction Reversals: A Guide for Merchants).
3. Notification: The merchant is notified of the chargeback and the reason code provided by the customer’s bank.
4. Evidence Submission: The merchant submits supporting evidence (e.g., receipts, shipping confirmations, communication logs) to dispute the claim.
5. Bank Review: The bank reviews the evidence and decides whether to uphold the chargeback or return the funds to the merchant.
6. Resolution: If the chargeback is upheld, the merchant loses the funds and may incur fees. If the merchant wins, the funds are returned.

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Prevent Chargeback Fraud with Chargeflow

While chargebacks are a complex challenge, they're not insurmountable.

The key is implementing a multi-layered approach:

• Fix operational issues to prevent merchant errors,
• Use strong fraud detection for criminal activity,
• And maintain clear communication to minimize friendly fraud.

Most importantly, focus on early detection - catching disputes before they become chargebacks can save you both money and time.

Chargeflow has recovered millions for merchants. Want next?

Fight and prevent chargebacks with Chargeflow by your side. Get instant notifications on chargeback requests, automate refunds and backend dealings to avoid fees, and pay us for prevented chargebacks ONLY. Works with all major card companies and platforms.

Try Chargeflow Free Today

4x ROI guarantee

$126M+ revenue recovered

Read next:

• Fraud Prevention vs. Chargeback Management

FAQs About Chargeback Prevention