Protect your business from chargebacks

A chargeback is when a cardholder files a dispute with their bank to reverse a transaction, claiming it was unauthorised, fraudulent, or the product or service was unsatisfactory.

In the guide below, we’ll walk you through:

How chargebacks can affect your business

Common reasons for chargebacks

Steps you can take to protect your business if – or when – you receive a chargeback claim from your customers

Chargebacks made simple

Chargebacks initiation

Cardholders can raise a chargeback typically in up to 120 days, after the purchase

Investigation

The issuing (or cardholder's) bank reviews the claim and may ask the cardholder for more information

Chargeback request

The issuing bank will get in touch with the card network (ie. Visa or Mastercard), to notify the business's bank

Merchant notification

The business receives the notice of the chargeback. It can respond within 7 to 30 days

Review and decision

The issuing bank reviews all evidence in up to 70 days. Several days after the review period, the issuing bank makes a decision. If for the cardholder – the business is debited. If for the business – the merchant keeps the money

Outcome

The cardholder learns the decision. The issuing bank and the business may take further actions based on the outcome

How chargebacks can affect your business

Financial impact

You could lose sales or get higher fees

Operational disruption

You may have to invest time in staff training and investigations

Reputation and trust

You could potentially lose current or future customers

Difficulty to secure payment processing

You may struggle to sign favourable agreements

Risk of account termination

Your payment processor or bank may end your relationships

Legal and compliance risks

You may have to deal with regulatory issues

Increased fraud risk

Your high chargeback rate may hint at cyber vulnerabilities

Impact on cashflow

Your revenue could get tied up during disputes

Common reasons for chargebacks

Fraudulent transactions

The transaction supposedly wasn't authorised

Product not received

The cardholder did not receive the item

Defective or not as described

The received product was damaged

Duplicate charges

Many charges for the same transaction

Cancellations not honoured

The cancelled order was still charged

Subscription issues

Recurring charges for supposedly cancelled subscriptions

Billing errors

Incorrect amounts charged

Customer service issues

Unresolved customer service disputes

Lack of recognition

Cardholders may not recognise the business name on their statement

Unauthorised use

Payments from unauthorised purchases, from a lost or stolen card

Best practices for preventing chargebacks

In case of a dispute, even if the business wins the defence, the case will still count against its chargeback ratio.

That's why chargeback prevention is key.

To avoid chargebacks, implement these strategies through the business operations:

Pre-sale

Clear descriptions

Have accurate product descriptions, pricing, and terms of service

Transparent policies

Implement clear return and refund policies that are easy to find

Quality control

Ensure products and services meet high-quality standards

Educate customers

Inform about policies, processes, and how to handle disputes before they escalate

Post-sale

Proof of delivery

Set and meet a realistic delivery date. On delivery, ask the customer to sign for the package. Retain this as proof and for security measures

Avoid miscommunication

Keep customers updated with confirmations, shipping notifications, and follow-up emails

Customer support issues

Prompt customer support

Respond to inquiries, address issues, and resolve disputes via customer service

Monitor transactions

Keep an eye on transaction patterns and flag any suspicious activity

Collect and present your evidence

To build a strong defence, you'd need to respond quickly with as much evidence – ie. all interactions with the cardholder – as possible.

Start by reviewing the case and reason code. This will hint at the chargeback reason, as well as if the case should be disputed.

Here is what you can do next:

1. Organise your records

Keep detailed records

Have records of every transaction, including order details, payment confirmation, and customer information

Document communication

Save all your correspondence with the customer

Provide proof of delivery

Use services that offer tracking and delivery confirmation – ie. delivery receipts and tracking numbers

2. Ensure you've the correct communication ready

Capture evidence of product quality

Include photos or descriptions of the products before shipping

Include customer acknowledgments

Ensure that customers agree to terms and conditions or return policies

Use transaction logs

Keep your database updated with the latest transaction activities

3. Communicate actively

Collect customer feedback

Gather customer reviews post-purchase

Prepare a response template

Respond with a structured template

Stay organised

Maintain a system for organising and retrieving evidence quickly