When a cardholder has an issue with a deduction on their credit card, payment regulation allows them to ask their bank (a.k.a, the issuing bank, card issuer, or financial institution) to reverse the charge. The bank will then have to decide whether to make an immediate chargeback or inquiry.

If the cardholder's bank makes a chargeback, they will deduct the amount under dispute and a chargeback fee from your wallet. And you will have to represent the transaction to them with compelling evidence that shows its legitimacy.

Depending on the compelling evidence you present to the customer's credit card company, they can resolve the dispute to your advantage, in which case you win the dispute, and Shopify will refund the chargeback fee. But if the dispute results goes against you, the cardholder retains the refund.

Sometimes, the cardholder's bank will send an inquiry before issuing a chargebacks. That means you have some grace period to resolve the case before they charge it back. The thing to always bear in mind, though, is that as long as there's a card payment, chargebacks are bound to happen at some point. And card issuers won't always contact you before reversing the transaction.

If you're looking for insights to prevent Shopify chargebacks, this is the best article online on that topic. We shall excavate valuable insights that'll help you manage your Shopify chargeback mediation efforts excellently.

Why Does Shopify Chargebacks Happen?

Shopify has broken down the labyrinth of the reason codes that cardholders give when filing disputes into eight distinct categories. Reason codes are essentially alphanumeric codes that card networks established to help everyone understand why the customer initiated a chargeback. We've written extensively about chargeback codes here.

Let's evaluate the specific reason codes you can expect in a Shopify payments chargeback one after the other.

Shopify Payments Chargeback Reason Code #1: Fraudulent Transaction

A fraudulent transaction chargeback happens if the cardholder does not authorize the charge. This class of disputes are at the top of the list for all Shopify payments chargebacks. They often occur if the card was stolen. According to research, actual fraud (card-related criminal fraud) accounts for only 29-30% of total chargeback losses for eCommerce. However, ~71% of digital commerce losses result from first-party or friendly fraud.

Shopify Payments Chargeback Reason Code #2: Transaction Unrecognized

An "Unrecognized Transaction" chargeback means the cardholder does not recognize the transaction, vendor's name, etc., as stated on the bill. You can minimize this dispute occurence with better merchant descriptor. Equally important, get authorization from the cardholder, and use CVS and CVV. Reduction in unauthorized transactions will reduce fraudulent chargebacks.

Shopify Payments Chargeback Reason Code #3: Duplicate Charge

Shopify marks the chargeback reason as "Duplicate" if the cardholder believes the merchant charged them twice for the same transaction. This dispute can result from a simple human error of the merchant failing to void multiple billing. It could also be that the merchant tried to process numerous transactions fraudulently, or the consumer authorized the transactions but later retracted them.

Shopify Payments Chargeback Reason Code #4: Canceled Subscription

A Canceled Subscription chargeback happens if the cardholder believes the merchant charged for a subscription after they canceled. It can equally mean the client forgot about the subscription and the merchant didn't send a reminder before a recurring billing. A well-crafted subscription cancellation policy can save you lots of headaches in this instance.

Shopify Payments Chargeback Reason Code #5: Product Not Delivered

A Product Not Delivered chargeback means the customer believes they did not receive the goods or services they purchased.

Vendors who do not have a well-drafted shipping and order fulfillment policy are susceptible to this category of Shopify payments chargeback. And according to available industry data, over a quarter (26%) of all chargebacks result from a product not being delivered. However, what that data does not show is that scammers also use "product not delivered" Shopify payments chargeback to steal from merchants.

Shopify Payments Chargeback Reason Code #6: Product Unacceptable

Shopify classifies the chargeback as "Product Unacceptable" if the cardholder feels they received the product alright, but it was defective, damaged, counterfeit, or not as the vendor described them. This category of Shopify payments chargeback often results from poor product descriptions or strict return policies.

To avoid this, ensure that your product descriptions are well-crafted, and accurately describes the product sold. More so, ensure that your return policy isn’t letting you down. Research shows that merchants shipping the wrong product is the reason behind 15% of all chargebacks. Additionally, 8% of chargebacks happen when a purchase doesn’t meet a customer’s expectations, or the product does not match the description the vendor advertised on the website.

Shopify Payments Chargeback Reason Code #7: Credit Not Processed

If the customer returned the product they purchased or canceled the transaction, and the merchant has yet to refund or credit the customer, Shopify will mark the chargeback as Credit Not Processed. Another cause of this category of Shopify payments chargeback is when the vendor issued the disputed credit but didn’t make the deposit on time before they filed a case.

Shopify Payments Chargeback Reason Code #8: General

When the chargeback reason code does not fall into any of the above categories, Shopify will mark it as "General" in line with its chargeback rules.

How to win Shopify Payments Chargebacks with ease

Now that you’ve understood the various reasons why customers file Shopify payments chargeback, let’s look at proven best practices on how to win disputes without breaking much sweat.

How to Deal with Fraudulent Transaction Shopify Payments Chargeback

The first course of action in handling fraudulent chargebacks is contacting the cardholder. In some instances, the cardholder may have forgotten about the transaction, or a relative made the purchase.

If, upon initiating contact you managed to find a middle ground and the client accepts the charge was legitimate, have them ask their bank to drop the chargeback. However, you must send sufficient evidence of your agreement with the cardholder to the credit card company.

But if you cannot reach a consensus with the cardholder or think their claim is untrue, the following are crucial pieces of evidence you can submit to the credit card company to fight the dispute.

1. The date and time that you fulfilled the order
2. The billing information the customer used
3. The IP address and country the customer used to place the order
4. Shipping and tracking information for the order
5. If a cardholder’s family member authorized the transaction, show a connection between the order recipient and the cardholder.
6. Add the IP address, email address, physical address, or telephone number they used in a prior transaction they did not dispute.

Always evaluate your orders before satisfying them and try human-proof payment records to minimize clerical errors. That also helps you excavate fraud patterns and determine potentially high-risk orders, thereby avoiding chargebacks.

Fulfilling high-risk orders can lead to more Shopify payments chargebacks. When you get a high volume of disputes, Shopify will discontinue your payment processing and bar you from transacting on their platform. So, it is highly imperative to keep your chargeback rate as low as possible. 

How to Deal with Transaction Unrecognized Shopify Payments Chargeback

As in Fraudulent chargeback, you should try to contact the client to handle an Unrecognized chargeback case. Again, the cardholder may have forgotten about the transaction. Or the purchase was made by their relative, and the cardholder does not want to pay the bill.

As stated above, if you can reach a consensus upon initiating contact, and the client accepts the charge was legitimate, tell them to ask their bank to drop the chargeback. Remember to send the evidence of your agreement with the cardholder to the credit card company.

But if you cannot find common ground with the cardholder or think they are not telling the truth, you should submit the following evidence to the credit card company to fight the dispute.

1. The date and time that you fulfilled the order
2. The billing information the customer used
3. The IP address and country the customer used to place the order
4. Shipping and tracking information for the disputed transaction

How to Deal with Duplicate Charge Shopify Payments Chargeback

To win this category of chargebacks, examine your books and see if you charged the client twice. If you find that the customer’s claim is valid, you need to accept the chargeback.

But if you realize you didn’t place a double billing, try to talk to the customer. Show them the transaction details. If the customer accepts the bill, tell them to contact their bank and drop the chargeback. Below are the documents you must add to your response to the credit card issuing company:

1. Details of the transaction under dispute and reasons for the two charges, as the case may be
2. Receipts to show that the two bills were for separate products or services
3. Any communication with the client where you explained the reasons for the charges

How to Deal with Canceled Subscription Shopify Payments Chargeback

If you can’t reach an agreement upon contacting the customer or think h/se didn’t cancel the subscription before the bill, then you have to show the credit card company some evidence to that effect. Below are vital pieces of evidence to include:

1. Your subscription cancellation policy
2. Emails or notifications you sent to the customer about their cancellation
3. Details of when and where you showed the customer the cancellation policy
4. If the product or service in question was digital, add an activity log that indicates the customer gained access to the product or service after they said they canceled their subscription.

How to Deal with Product Not Received Shopify Payments Chargeback

To win the Product Not Received chargeback, you should have strong evidence that the customer received the product before filing the dispute. Present your strong reasons to show the cardholder received the product or service. If you reach out to the customer and cannot resolve the dispute, the next cause of action should be to represent the case with the following documentation.

If the customer picked up the product from your physical location, then you should include:

1. The cardholder’s signature on the pick-up form
2. A copy of identification presented by the cardholder
3. The details of identification issued by the cardholder

If you delivered the product to the cardholder’s home or business address, then include:

1. Shipping and tracking information for the order to show the status of delivery
2. Proof of delivery date and time
3. Evidence that you delivered the item to the same billing address provided
4. Proof that the cardholder was working at the address at the time of delivery

If the product or service was digital, add the IP address, timestamps, Server, or activity logs to show the customer accessed the product or service.

How to Deal with Product Unacceptable Shopify Payments Chargeback

In instances where the client’s Product Unacceptable claims are untrue, or the customer didn’t try to return the product or cancel the service before they made a chargeback, or you already replaced the order, below are compelling evidence to use in your representment:

1. Your communication with the customer to address the issue
2. Documentation or pictures of the products from your store showing the products were as described.
3. Evidence to authenticate the cardholder did not attempt to return the merchandise (if applicable)
4. If you shipped a physical product, include the tracking number, complete shipping address information, date of shipment before the dispute date, shipping carrier, and proof the address delivered matched the address provided by the customer.
5. If you shipped a digital product, add an IP address, timestamps, server, or activity logs to show that the customer accessed and used the purchased digital goods.

How to Deal with Product Unacceptable Shopify Payments Chargeback

In instances where the client’s Product Unacceptable claims are untrue, or the customer didn’t try to return the product or cancel the service before they made a chargeback, or you already replaced the order, below are compelling evidence to include:

1. Your communication with the customer to address the issue
2. Documentation or pictures of the products from your store showing the products were as described.
3. Evidence to authenticate the cardholder did not attempt to return the merchandise (if applicable)
4. If you shipped a physical product, include the tracking number, complete shipping address information, date of shipment before the dispute date, shipping carrier, and proof the address delivered matched the address provided by the customer.
5. If you shipped a digital product, add an IP address, timestamps, server, or activity logs to show that the customer accessed and used the purchased digital goods.

How to Deal with Credit Not Processed Shopify Payments Chargeback

Suppose you couldn’t resolve the dispute after contacting the client, and you think the chargeback is invalid. In that case, you should send your compelling evidence to the credit card issuing company—state whether you refunded the customer before the chargeback or weren’t entitled to a payment refund.

Add the following compelling evidence in your rebuttal letter:

1. A clear description of your refund and return policies
2. Well-crafted explanation of when and where you showed the customer the refund policy
3. Any communication (emails or notifications) with the customer about the refund
4. A full description of why the customer was not entitled to a refund

How to Deal with General Shopify Payments Chargeback

If you are fighting any other Shopify dispute that does not rank within the categories we’ve discussed, but was rather marked as General, below are some critical evidence you should send to the credit card company:

• A piece of “comprehensive” information about the products the customer ordered
• The date and time the customer placed the order and when you fulfilled it.
• The customer’s billing information, IP address, country, emails, and any other form of communication you had with the customer
• USPS/FedEx/UPS or additional online tracking or shipping confirmations
• Well-crafted proof of prior refunds or replacement shipments

Automate Your Chargebacks, Let Technology Do the Work!

While you can take the vital steps listed above to mediate and minimize legitimate Shopify payments chargebacks, there’s no guarantee they’ll help you stop fraudulent chargebacks. You can use all the best practices in the world and still have meritless disputes filed against you. It's true. And implementing severe chargeback prevention protocols can also impact your conversion rates.

Again, fighting false chargebacks manually is becoming incredibly difficult and time-consuming. Estimates show only a 12% success rate for the most part. An efficient chargeback management strategy, such as Chargeflow AI-assisted framework, has become popular because it ticks all the boxes. It helps merchants stop chargebacks before they happen and recover losses on autopilot.

Chargeflow helps the boldest merchants worldwide focus on building their brands, serving their customers, and delivering better products without the burden of disputes and chargebacks. Our case study has shown merchants getting up to 5x ROI. See how it works here.