If you run a business that accepts credit cards, you’ve probably heard the word chargeback—and not in a good way. Chargebacks can be a real headache, eating into your revenue and causing unnecessary stress. But what exactly are they, why do they happen, and how can you prevent them? Let’s break it down.
What Is a Chargeback?
A chargeback happens when a customer disputes a transaction with their bank or credit card company. You, the merchant, will have the opportunity to submit a rebuttal to the customer’s claims. If the bank sides with the customer, the transaction is reversed, and you lose the sale (plus additional fees).
The Different Types of Chargebacks
Not all chargebacks are created equal. Here are the three main types:
🔹 True Fraud Chargebacks – These occur when a stolen credit card is used to make a purchase. Since the real cardholder didn’t authorize the transaction, they dispute it, and the charge gets reversed.
🔹 Friendly Fraud Chargebacks – Despite the name, there’s nothing friendly about these. This happens when a customer makes a legitimate purchase but later disputes the charge—whether due to forgetfulness, misunderstanding, or intentionally trying to get something for free.
🔹 Merchant Error Chargebacks – These occur when a business makes a mistake, such as billing a customer twice, shipping the wrong item, or failing to issue a promised refund.
How Chargebacks Hurt Your Business
Chargebacks aren’t just annoying—they’re costly. Here’s why:
🚨 Lost Revenue – Not only do you lose the sale, and potentially merchandise, but you also get hit with a chargeback fee (typically $20-$100 per case).
🚨 Increased Processing Costs – Too many chargebacks can flag your business as high-risk, leading to higher payment processing fees.
🚨 Risk of Losing Your Merchant Account – If your chargeback ratio gets too high (usually over 1%), your payment processor may suspend or terminate your account altogether.
Tips to Reduce Chargebacks
So, how do you fight back? Here are a few simple ways to keep your chargeback rates low:
✔️ Use Clear Payment Descriptions – Customers should recognize your business name on their bank statements to avoid unnecessary disputes.
✔️ Provide Excellent Customer Service – Make it easy for customers to reach you with concerns before they turn to their bank for a refund.
✔️ Use Chargeback Alerts & Prevention Tools – Services like Ethoca and Verifi notify you of disputes before they become chargebacks, allowing you to issue refunds or resolve issues proactively.
✔️ Track & Address Fraudulent Transactions – Use fraud filters, CVV verification, and address matching to minimize true fraud chargebacks.
✔️ Keep Detailed Records – Maintain receipts, shipping confirmations, and communication logs to provide evidence if you need to dispute a chargeback.
Need an Expert to Manage Your Chargebacks?
If dealing with chargebacks and alerts is taking up too much of your time (or driving you crazy), why not leave it to an expert? RCS specializes in Chargeback Management, helping businesses recover lost revenue, improve win rates, and reduce disputes before they even happen.
✅ Save Time – Focus on running your business while we handle the disputes.
✅ Increase Win Rates – With the right strategy and compelling evidence, we’ll boost your chances of successfully fighting chargebacks.
✅ Lower Your Chargeback Ratio – Keep your merchant account in good standing by preventing and managing disputes more effectively.
If you’d rather have a trusted expert handle your chargebacks, let’s chat! Reach out today, and let’s find a solution that works for your business.