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In the best-case scenario, chargebacks are an annoyance. In the worst case, they become an overwhelming resource drain that destroys earned revenues. And that doesn't even factor in the many hidden costs of a chargeback, such as reputation damage, loss of lifetime value of a customer, and operational friction. For the health of your business, you must learn how to win chargebacks. 

Chargebacks are also a necessary right and consumer protection. And that has value. Your customers trust the payment industry because they can dispute credit card charges they feel are incorrect or unfair. While a nuisance, the dispute process is a crucial part of the ecosystem—and why you need a proper response strategy. 

But what does a good response strategy look like? Let’s explore all you need to know about customer disputes and how you can win chargebacks as a merchant.  

Understanding the Reasons for Chargebacks:

A customer initiates a chargeback when they disagree about a posted transaction with their credit card issuer. There are numerous reasons why someone may dispute a charge, but here are some of the most common:  

  • Unauthorized transactions: The cardholder claims that they did not authorize the payment. This usually relates to true fraud where a criminal uses a card without the cardholder's consent. 
  • Product or service not as described: The cardholder claims they made a purchase in good faith, but the delivered item or service is unacceptable. Chargebacks of this type can relate to counterfeit goods, knockoffs, damaged products, or wrongful delivery. 
  • Non-receipt of product or service: The cardholder claims they purchased an item in good faith but have not received the paid-for service or product. Such chargebacks often relate to shipping problems, stolen merchandise, or late delivery. 
  • Clerical errors: The cardholder claims that the payment did not process correctly. Such claims can extend to numerous errors made by merchant or credit card payment systems. Examples include duplicate transactions, incorrect sale values, failed credit, wrong account numbers, use of an expired card, etc
  • Friendly fraud: The cardholder (willingly or by mistake) engages in fraud. This is known as friendly fraud, as the cardholder makes false claims—an abuse of the dispute process. Examples include when a customer files a dispute due to forgetfulness, buyer’s remorse, or malicious attempts to recover lost funds. A massive 23% of surveyed consumers who have disputed a purchase admit to participating in first-party fraud. 

Implementing Preventative Measures:

Clearly, a chargeback can occur for numerous reasons. But with an accurate understanding of why a consumer wants to dispute a charge, you can take steps to deter the overall volume of disputes. Common preventative actions include:  

  • Clear product descriptions: Ensure that all product or service descriptions are accurate and legible. That can directly address unacceptable product chargebacks. It also helps set proper customer expectations for greater trust and consumer satisfaction. 
  • Transparent return and refund policies: Clearly state and communicate return and refund policies. Research shows that around two-thirds of shoppers read a return policy before an order. And a customer who is aware and happy with your store terms of agreement is less likely to dispute a charge. Yes, a refund does include outlaid money, but it is far less costly than a chargeback. Plus, a hassle-free return policy is good customer service that can once again boost customer satisfaction.  
  • Use of chargeback automation: Implement tools like Chargeflow to build a comprehensive defense strategy. Automated solutions can handle numerous tasks throughout the dispute process. Many tools monitor transactions in real-time, assess consumer behavior, and offer case management features. Revenue loss from chargebacks decreased from 7.79% in 2017 down to 2.31% in 2021. That decrease is due to many factors, but the increased revenue recovery by mitigation solutions is a likely reason.  
  • Prompt customer service: Address customer concerns and queries promptly to prevent chargebacks. That helps turn a dispute – a high-friction event that can destroy the business-to-consumer relationship – into a positive experience. Well-trained customer reps then have ample opportunity to turn problems that could become chargebacks into helpful customer interactions. Such efforts pay in lifetime sales value: 96% of customers say customer service is an essential factor in brand loyalty.
  • Regularly update billing descriptors: Ensure all names appearing on customer statements are recognizable. That reduces confusion and forgetfulness, two factors that contribute to chargebacks. Optimize your descriptors to lower the risk of false disputes. 

Effective Communication with Customers:

As noted, chargebacks sometimes happen due to human error. Service reps are not perfect, and operation systems can fail. There is a reason why such a significant number of chargebacks are due to clerical errors (20%-40%).  

Luckily, you can defend against those types of chargebacks with good communication. Shared interactions result in consumer clarity, an indispensable chargeback prevention tactic. Good communication can involve:  

  • Sending order confirmations: Deliver immediate product notification via email or SMS. Include pertinent data (date, product value, payment information) that help the consumer identify the purchase and charge. 
  • Providing shipping and delivery updates: Regular shipping updates can deter a customer from filing “merchandise not received” disputes. Delivery confirmation also helps limit fraud (e.g., porch theft). Lastly, delivery receipts are useful evidence against chargeback fraud or delivery scams. 
  • Investing in open channels: 73% of consumers use multiple channels during a sales journey, all because they prefer more seamless communication. With several different avenues of contact, a customer can access service reps for a better experience. And the more customer touchpoints, the more opportunities you have to be proactive in your dispute defense strategies.

Proper Record Keeping:

Even with the best preventative measures, chargebacks can still occur. Fraud tactics continue to evolve, and many consumers are willing to abuse their consumer protections (stats show that almost 80% of chargebacks are proven to be fraud or friendly fraud). 

Luckily, you can defend against such chargeback fraud. False claims are not an inevitable cost of doing business. They are worth fighting, a task accomplished through a process known as representment. Representment is your chance to deliver compelling evidence proving the transaction occurred in good faith. If you win the dispute, all revenue owed returns to your accounts. That’s how you win chargebacks as a merchant.  

But you need proof, so the more data you provide, the better. Be sure to store the following transaction information: 

  • Evidence of legitimacy: Order confirmation, invoices, receipts, and transaction logs all serve as concrete evidence. 
  • Proof of delivery: tracking numbers and delivery confirmation are pivotal for claims of non-delivery.
  • Customer communications: emails, chats, and support tickets show genuine effort on your part to resolve a dispute before the customer initiates a chargeback.
  • Transaction data: Sale amounts, dates, times, and account numbers are proof of a complete transaction. Even communications between your payment processors can be crucial evidence proving an authentic transaction. 
  • Authorization data: Signed contracts, checkout confirmations, and card verification details all show the customer authorized the charge. This data is also helpful in eliminating instances of true fraud. 

Responding to Chargebacks:

How you respond to a dispute can also help lower the overall cost of a chargeback. Chargebacks are complex, and the dispute process can take up to 120 days—efficient use of time is a crucial way to limit confusion. Otherwise finance teams run into liquidity problems, inventory can become a nightmare, and the administrative burden uses up resources.  

An effective response strategy is necessary to win chargebacks. Here are some tips to help you gain greater control over your chargeback management: 

  • Act quickly: Respond to chargeback notifications as soon as possible. That helps keep all records in order while avoiding an automatic dispute loss.
  • Define the chargeback: Create a system that labels the reason codes of each chargeback. Accurate labels will help you compile the necessary evidence. You can even build response templates for each chargeback type. 
  • Engage with the customer: Sometimes, direct communication can resolve misunderstandings and lead to chargeback reversals.
  • Respond with clear evidence: If resolution is impossible, draft a compelling dispute letter with all the necessary evidence.
  • Use chargeback management solutions: Several digital tools can help you make your entire chargeback defense hassle-free yet effective. 

Continuous Monitoring and Learning

Even after a chargeback resolves, you can take corrective action. Each dispute provides data that shows new ways to evolve your defense strategy. Continuous improvement allows you to discover and correct the root causes within your business operations that result in chargebacks. Adjustments after each chargeback are essential for future chargeback prevention.  

Here are some ways you can improve your store operations to help reduce chargeback volume: 

  • Identify weaknesses: Regularly assess why or how a dispute evolved. Patterns can help show bottlenecks or problem areas that need fixing. 
  • Adapt to changing threats or trends: Consumer behavior can rapidly shift. For example, chargebacks can increase during the holiday season. Understanding those trends can help you prepare adequate resources for your chargeback defenses. 
  • Optimize payment processes: A simple check-out experience helps reduce chargebacks. Look for areas of friction that you can streamline. 
  • Refine your fraud prevention: Fraud and scam tactics continue to change. Regularly update your prevention tactics to help defend chargebacks due to true fraud. 
  • Account for customer feedback: Customers can highlight areas of concern you can remedy. Adjusting to that feedback helps prevent disputes connected to product quality, customer service, or billing clarity.
  • Opt for data-driven decision-making: Chargeback solutions can use data to develop actionable insights. Analysis of customer behavior, transaction data, and chargeback process can help with decision-making. That can help you better allocate resources, update best practices, and draft better response templates


Chargebacks are a costly problem. For every $100 in chargebacks, your true chargeback cost is $240 in wasted time, expensive fees, penalties, or additional losses of goods and services. Proactive chargeback management is crucial for the health of your business. We even created a chargeback calculator to help you better calculate all the hidden costs.

More importantly, chargeback prevention is a holistic, ongoing process. It is not a one-time task nor a standard cost of business. Instead, it is a valuable consumer protection, and all payment industry players should work to uphold its integrity. 

Such efforts are also a worthy personal investment. You can reduce your chargeback volume, improve the customer experience, and earn back lost revenues. Review your current chargeback management strategy and consider using the tips and action steps listed above to win chargebacks as a merchant.


What are some common chargeback fraud schemes and tactics used by fraudsters?

Common chargeback fraud tactics include using stolen credit card information, engaging in "friendly fraud," and using identity theft. Preventing these schemes requires awareness and steps to verify customer identities and product quality.

How can I educate my employees to prevent chargeback fraud?

Train employees to identify suspicious activity, verify customer information, and emphasize accurate product descriptions. Ongoing education and training on the latest fraud schemes can help create a culture of prevention.

Should I invest in chargeback prevention software or services to protect my business?

Investing in chargeback prevention software or services can be valuable for high-risk businesses. Look for fraud prevention tools and real-time transaction monitoring, consider costs and fees, and evaluate providers before investing. Protecting your business from chargeback fraud can prevent financial and reputational damage.

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Average Dispute Amount
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# Disputes Per Month
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