Blog Article

5 Common Questions About Chargebacks

Author: Zakry Chami

We all know chargebacks can be scary.

Chargebacks leave merchants with a bitter taste in their mouths and in order for a business to remain profitable and continue to grow a loyal customer base, it’s important to fully understand chargebacks and what you can do to prevent them.


Here are 5 common questions about chargebacks we can finally answer:


1. Were chargebacks made to protect the consumer?

YES - Chargebacks were established in the interest of the consumer and protects them against unauthorized or fraudulent transactions. It’s the consumer’s backup plan to ensuring their money is always safe. Banks will always side with the consumer when the merchant has a lack of compelling evidence.

At the end of the day, customers shouldn’t have to pay for something they did not purchase themselves, for something that was not as described, or for charges that should never have been placed.


2. I’m a merchant, am I defenseless in the chargebacks process?

NO - As a merchant, you are entitled to chargeback rights presented to you by the card brand networks (Visa, Mastercard, etc.) such as being able to dispute a chargeback. If you choose to do so, your acquiring bank will review your case. If you are able to gather the compelling evidence needed to fight the chargeback, your bank will act on your behalf and represent the chargeback to your customer’s issuing bank.


3. Are all chargebacks just consumers committing fraud?

NO - In a recent study by JP Morgan, they found that an estimated 30 percent of all chargebacks in North America were friendly fraud. In fact, the majority of all chargebacks are a customer not recognizing a charge on his/her credit card statement or a customer’s credit card was stolen or used without consent (credit card fraud).

However, there are many ways to help remedy or prevent any friendly fraud disputes such as requiring signatures for deliveries, having a clear return policy, and keeping great customer records.

For information on how to prevent chargebacks, click here.


4. Are chargebacks expensive and do they take a while to settle?

YES - From connecting with the banks to compiling all necessary evidence and everything in between, the entire resolution process can take weeks and sometimes even months. The chargeback itself can cost up to $100 and if an arbitrator is needed to help resolve a dispute, the process can cost upwards of $300.

Not to mention, if you get too many, you could be labeled a high-risk merchant to all banks which usually means higher chargeback fees, possible fines of up to $25,000, and in certain cases, bank account closure.

Some of the other more likely costs associated with chargebacks are as follows:

  • loss of your product or service that was sold
  • any transaction processing fees
  • shipping costs
  • sale revenue
  • increased stress
  • lost time proving validity in your sale


For a more detailed breakdown of the chargeback process, click here.


5. I’m a merchant, can my payment processor help me during the chargeback process?

YES - Your payment processor should be your fraud prevention guru. They should be there for additional support in these situations and should be there to guide you and help provide supporting documents during a chargeback dispute.

Furthermore, your payment processor should be able to customize added fraud security features and fraud prevention tools based on your business’s needs and risks. A good way to stay proactive is to continue maintaining a good relationship with your processor and by applying any chargeback prevention tips your payment processor has to offer.

Choosing to partner with a reputable payment provider like Paystone, your business can reap the benefits expert payment support and secure credit card processing.



Zakry Chami

Zakry Chami

is the Product Marketer at Paystone. You can find him playing squash at his local fitness club or planning his next backpacking trip.