The Top 5 Tips for Disputing a Chargeback as a Merchant


The hard truth is that banks rarely favor the merchant when it comes to disputing a chargeback. The process tends to follow the oft misguided phrase of “the customer is always right”, which can leave a customer with more money than they started with and your product in their hands.

It’s easy to understand why you would want to fight every chargeback, dispute, and refund request that pops up. That isn’t always the best method forward, though. Use our tips below for disputing chargebacks to lean the scales in your favor.

Tip 1: Get to Know the Two Categories of Chargebacks

In general, there can be two major categories that chargebacks fall into: fraud and non-fraud. This is just the first step in preparing for a positive outcome when disputing chargebacks.

Fraud Chargebacks

Fraud is further broken down into actual fraud and friendly fraud. Actual fraud can happen if a customer knowingly makes a purchase and then calls their bank to say, “I have no idea what that charge is and I want it gone”. This is a type of cyber theft that should be disputed if it can be proven (which we’ll outline later).

Friendly fraud is similar. Sometimes, a customer doesn’t recognize the charge on their account and requests a refund, they get buyer’s remorse, or they simply forget they made the purchase and dispute it.

Another type of actual fraud is identity theft where someone else makes a purchase using another person’s credit card information. In this case, the cardholder is unaware of the purchase and there’s no possible way to dispute the chargeback.

Non-fraud Chargebacks

Non-fraud is where the customer requests a refund from their credit card because they never received the items, the item was broken, it wasn’t what they ordered, etc. This is a complicated charge to fight because it depends heavily on the proof submitted by the customer.

Chargeback Reason Codes

Credit card networks classify each chargeback under a specific category they organize by reason. They’re called chargeback reason codes. The specifics differ for each issuer (VisaMasterCardAmerican Express, and Discover) in the way they’re organized or numbered, but in general they all follow the same guidelines. Understanding the chargeback reason code for your charge will help you better dispute it with the network or bank. A successful dispute on your end requires proper evidence, knowledge, and presentation.

Tip 2: Keep Proper Records of Every Customer Interaction and Transaction

You need evidence to dispute a chargeback and stand a chance at winning it. The only way to do that is to keep evidence on hand and organized.

Transaction History

Transaction history should be kept anyway, not just for chargeback disputes. But in this case, you’ll want the date, card transaction amount, destination info, proof of delivery and card data used to prove to banks that this is not a chargeback you should be held accountable for. The more information you have, the better your chances at succeeding are.

It’s a good idea to find a system of organization that works best for you. Whether that’s through your CRM, automated, or organized by hand, get it done so you can easily find what you’re looking for in the future.

Customer Interaction History

Depending on the chargeback type, banks might be interested in seeing how you handed the customer’s original refund request (if there is one). Save all efforts of communication both from you and the customer to outline exactly where both parties stand when it comes to the refund.

While credit card companies favor the customer more than anyone, you can sway their alignment if the right proof is presented to them.

Tip 3: Maintain Quality Customer Service

It’s true that many chargebacks occur because the customer avoids using your customer service options and heads straight for their credit card. Either way, you should have high quality customer service in place.

If the customer avoids contacting you directly, it’s good proof to the bank that you do have it clearly available. That means you need to have a link on your site, customer service outlets linked in confirmation emails, and easily accessible on virtually all platforms: phone, email, chat, and mail. The point is to block any excuse for “I didn’t see your customer service number”.

If the customer does contact you directly first, prove how professional and courteous you are while outlining why this customer is not receiving a refund. Maybe even offer a small discount on their next purchase as a gift. Banks want to see how you handle the request and why they should validate your reason for not issuing a refund.

Tip 4: Gauge Which Chargebacks to Dispute, and Definitely Fight the Ones You Can

Not every chargeback can or should be fought. You can think of it like crying wolf: if you fight too many times, then banks or credit card companies will brush off your request because they won’t think it’s valid.

When you understand fraud and reason codes better, you’ll have a clearer idea of which ones you should fight. And the ones that can be fought should be, because those are the ones you don’t deserve paying the consequences for. If you’ve got compelling evidence to prove it, by all means please fight your way to success. Because every possible chargeback you don’t fight is a total loss for your company and fighting it doesn’t cost a dime.

Having said that, some cases are handled automatically by the acquirer. Contact your merchant account provider or issuing bank for specific information on what they automate so you don’t waste time and effort on fighting a case that’s being handled for you.

Tip 5: Act Fast If You’re Serious About the Dispute

Time is money. In this case, the longer you take to handle cardholder disputes, the less chance you have to keep your funds. When you see a chargeback, refund request, or dispute of any kind, act on it. Research it first, then contact the customer and take it from there.

The sooner you act, the better it looks for acquiring banks, too. They’ll see how proactive you are at managing customer requests and look positively on your business.

Ways to Prevent Chargebacks and Fraud from Happening

The best way to handle the chargeback process is to prevent them from happening in the first place. While it is impossible to completely eliminate the potential, you can certainly reduce it.

Analyze Your Dispute Win Rate

Of the chargebacks you do receive, it’s important to analyze their frequency and success rate. You’ll gain insight into the more prevalent types of chargebacks you are subjected to which could help you update your internal operations to better prevent them from happening. You’ll also be more informed of which types of chargebacks you’re likely to win so you can better put your efforts onto those.

Keep in mind the actual win rate should only be calculated with total disputed charges minus the ones with subsequent exceptions. Those exceptions include pre-arbitration, arbitration, and 2nd representment. Divide that by the total number of original transaction disputes and you’ll have your actual win rate.

Update Your Checkout Security

To avoid many types of actual fraud, implement security measures during checkout. There are several identity verification plugins you can use like 3D Secure, CVV, and AVS to decrease the chances of actual fraud.

Share and Update Your Return Policy

A lot of chargebacks happen because users cannot find the return policy. If this is the case, make sure it’s accessible from everywhere on your site and in every email sent to the customer.

If customers avoid requesting a refund from you because they don’t agree with your refund policy, then it’s time to update it. In comparison, you lose more money on a chargeback than if you agreed to a refund. That’s because you pay a hefty chargeback fee on top of the disputed amount lost in the transaction. So, if you’re disputing a lot of chargebacks regarding the same issue, then that’s a cue to update your policy.

Use a Better Merchant Account Provider

A good merchant account provider will offer chargeback protection and fraud prevention services, like what we do at DirectPayNet. Merchant account service providers like us better prepare you for chargebacks and work closely with you as well as issuing banks, payment processors, and debit/credit card issuers to help you combat them.

Set Up Your E-Commerce Business with Chargeback Protection in Mind

Contact DirectPayNet to get set up with a high-risk merchant account that protects you from chargebacks and in the chargeback dispute process. We’ll help secure your checkout from fraud without disrupting the user experience.

Get in touch with us today if you have issues with chargebacks. Our customer support team is here to help.

About the author

As President of DirectPayNet, I make it my mission to help merchants find the best payment solutions for their online business, especially if they are categorized as high-risk merchants. I help setup localized payments modes and have tons of other tricks to increase sales! Prior to starting DirectPayNet, I was a Director at MANSEF Inc. (now known as MindGeek), where I led a team dedicated to managing merchant accounts for hundreds of product lines as well as customer service and secondary revenue sources. I am an avid traveler, conference speaker and love to attend any event that allows me to learn about technology. I am fascinated by anything related to digital currency especially Bitcoin and the Blockchain.