How to Dispute a Chargeback: A Complete Guide for Merchants

Chargebacks can be costly and disruptive for merchants. Mastering the chargeback process not only helps protect your business from lost revenue and fees but it also helps reduce disputes and maintain customer relationships. Learn about the common triggers of chargebacks and implement effective prevention strategies, to minimize financial risk and handle disputes confidently and effectively. 

What is a Chargeback and Why It Matters to Merchants

A chargeback occurs when a customer disputes a transaction and their bank reverses the payment. For merchants it’s not just about losing a sale, the repercussions of the chargeback are important too as they can quickly eat into their profits. 

Banks often impose chargeback fees on merchants to cover the administrative cost. These fees can range from $15 to $100 per transaction, depending on the bank or payment processor. This is in addition to any lost revenue from the original transaction, making chargebacks a costly issue for merchants if not managed effectively. Chargeback fees can vary based on the payment processor or card network, and some fees can be as high as $100 per dispute, significantly impacting a merchant’s profitability. For more detailed information on chargeback fees and how to manage them, visit our comprehensive guide here.

Chargebacks also hurt customer relationships. Unresolved issues often lead to dissatisfaction, making merchants need to resolve disputes quickly. Understanding how chargebacks work and how to dispute a chargeback helps merchants navigate the chargeback process and protect both revenue and customer loyalty. 

Steps to Dispute a Chargeback as a Merchant

Even though merchants don’t issue chargebacks, they still play a significant role in responding to them. Here’s how merchants can effectively dispute a chargeback and protect their revenue:

1. Gather Documentation and Evidence

For merchants to successfully dispute a chargeback, compelling evidence needs to be gathered. Ideal evidence includes signed delivery receipts, transaction records, email correspondence with the customer, and proof of shipment or product delivery. Chargeflow can automate and streamline this process, ensuring merchants are prepared with the necessary documentation.

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2. Respond to Chargeback Requests

Timing is key here. Banks and payment processors impose strict deadlines on merchants. The time given to respond to a chargeback is usually between 10-15 days. 

If a merchant misses this deadline it will result in an automatic loss of the dispute. You can ensure timely responses by utilizing chargeback management tools, like Chargeflow, to help stay on track. 

3. Submitting Evidence

The evidence requirements to dispute a chargeback vary according to the different card networks. For example, Visa requires proof of delivery and customer authorization, while Mastercard prioritizes proof of refunds, credits, and clear communication of policies. Tailoring your submitted evidence accordingly will improve your chance of winning the dispute.

Common Reasons for Chargebacks

Chargebacks happen for several common reasons. Understanding these reasons can help merchants prevent disputes before they occur and respond effectively.

Here are the most common reasons merchants face chargebacks:

Fraud

The most common cause for chargebacks is fraudulent transactions. This includes both true fraud and friendly fraud. According to our State of Chargebacks Report 2024, friendly fraud accounts for 8 out of 10 chargebacks.  Friendly fraud occurs when customers dispute legitimate transactions, while true fraud involves unauthorized transactions. 

Customer Disputes

If a customer is dissatisfied this can also lead to chargebacks. Making sure to offer strong customer service and clear communication can help merchants resolve issues before they escalate into disputes. If complaints are addressed early and refunds or replacements are offered this can also help prevent unnecessary chargebacks. As Ariel Chen, CEO of Chargeflow states, “better to invest in refunds, not chargebacks.”

Best Practices for Reducing Chargebacks

Reducing chargebacks is crucial to maintaining profitability and avoiding unnecessary disputes. Implement these best practices to minimize the risk of chargebacks:

Clear Return Policies

Have a clear and easy-to-understand return policy so customers can return items easily and be less likely to dispute charges. The return policy should be clearly visible on your website. Be proactive in communicating return options to customers. The goal here is to make sure your return process is straightforward and hassle-free to avoid frustration which ultimately leads to disputes.

Accurate Product Descriptions

Provide clear, detailed descriptions of your products such as size, color, material, and functionality to ensure customers know what to expect and there are no surprises. If product descriptions are misleading or incomplete this is where you run the risk of customer dissatisfaction and chargebacks. Use high-quality images for additional transparency.

Proactive Customer Support

Customer support efforts aim to resolve issues before they escalate to chargebacks. Therefore, merchants should encourage their customers to reach out with any concerns and make sure they promptly respond to their inquiries. Offering 24/7 customer support or live chat is a great way to provide real-time dispute handling and reduce the chances of chargebacks.

Fraud Detection Tools

Fraudulent transactions are one of the leading causes of chargebacks. Implementing fraud detection tools is crucial for identifying and mitigating both true fraud and friendly fraud. Advanced systems powered by AI and machine learning can analyze transaction patterns in real-time, flagging suspicious activity before it leads to a chargeback. Tools like CVV verification, 3D Secure,  and automated fraud detection tools continuously evolve, becoming more effective in detecting anomalies and reducing the risk of fraud-related chargebacks. By proactively addressing potential fraud, merchants can safeguard their revenue and improve chargeback win rates.  

Leverage Alerts to Prevent Chargebacks

You can significantly reduce your dispute rate leveraging alerts like Chargeflow Alerts which notifies you of potential chargebacks before they occur. With real-time alerts you have the chance to address issues instantly, preventing chargebacks from happening at all. By integrating alerts into your operations, you can stop disputes before they escalate which will save you time, money, and protect your reputation.

Using Chargeback Management Tools to Protect Your Business

Incorporating chargeback management tools in your operational strategy is one of the most effective ways a merchant can manage chargebacks and protect your revenue. Solutions like Chargeflow allow you to streamline the entire process allowing you to: 

• Gather evidence easily
• Track disputes
• Improve your chances of winning disputes
• Ensure accuracy
• Save time through automation

Automated chargeback management solutions like Chargeflow are equipped to handle the entire process. From collecting the necessary documentation to submitting it to the right payment processor on time. Automating key tasks such as evidence collection, deadline tracking, and dispute submission allows merchants to significantly reduce their manual effort and ensure accuracy.

Benefits of Using Chargeback Management Tools

• Time efficiency: Automated tools allow merchants to focus on running their business more efficiently.
• Improved Win Rates: By ensuring all relevant documentation is accurately compiled and submitted within their deadlines these tools increase your chances of winning disputes.
• Data-Driven Insights: Within the framework of chargeback management platforms you can utilize analytics and insights to identify chargeback patterns. This helps merchants proactively address the root causes of disputes.
• Fraud Prevention: Solutions such as Chargeflow integrate fraud detection systems to identify potential fraudulent transactions early and minimize the risk of chargebacks due to fraud.

Using chargeback management tools can reduce chargeback losses, minimize manual effort, and manage disputes more effectively.

Master the Chargeback Process to Protect Your Business

Properly managing your chargeback process not only protects your revenue but also strengthens your customer relationships. Using clear return policies, accurate product descriptions, and responsive customer support along with automated tools like Chargeflow, can reduce chargebacks and handle disputes effectively.

Ready to streamline your chargeback process? Learn how Chargeflow's automated tools can help you save time, reduce chargeback losses, and protect your business today. Reach out today!