Your customer just filed a chargeback. That’s the end of the story, right? Not quite! As complicated and stressful as chargebacks may seem, you can fight back — and win.

But it’s not easy. For one, the process of disputing a chargeback doesn’t favor the merchant. Banks and credit card companies prioritize their customers’ satisfaction. As such, customers must provide very little proof to convince banks or credit card companies to issue a chargeback.

Because this process is so cumbersome, many businesses make mistakes. That doesn’t mean you have to! Here are the most common pitfalls to avoid when disputing a chargeback.

1) Not communicating clearly with customers

There’s a litany of reasons why customers file chargebacks: because they don’t recognize the transaction on their credit card statement, they bought the wrong item, they’re dissatisfied with the product or service, or they feel as if they were confused or misled by the product description. Although these issues seem varied, they all boil down to breakdowns in communication on the merchant’s part.

Clearly communicating with your customers both increases their trust and prevents confusion. If you provide regular updates about the status of a purchase, empower customers with options to see what’s going on in their accounts, and optimize the payment process, you reduce the number of chargebacks you’ll have to fight. Get more tips on how to proactively reduce friendly fraud.


2) Not fighting back

Of course, you won’t win every dispute that crosses your desk — and challenging every chargeback is a waste of time and resources anyway. You should, however, take a careful look at the situation before deciding not to challenge a chargeback. If you don’t, your bottom line will take a serious hit.

When you’re confident that you have a compelling case on your hands, and you have the time and resources to fight it, then start gathering evidence! At a minimum, you’ll need to prove that the customer placed an order and received their item.

3) Not tracking transactions

To fight chargebacks, you have to keep detailed records of all transactions. Make sure you’re collecting customer and purchase information, including screenshots; you can later use this material as evidence that the customer actually did purchase or receive their item.

Use email to correspond with your customers, and keep copies of all relevant receipts, notices, and paperwork; in disputing a chargeback, you’ll often need to present a signed delivery slip, CVV verification, and emails between you and the cardholder. And while you’re at it, invest in an organized filing system to store this information, so you can quickly access it when you need it.

4) Not understanding reason codes

Each chargeback is tied to a reason code that classifies the type of chargeback, explains why the customer filed the chargeback, and enumerates the evidence a merchant must provide to successfully dispute the claim. Visa has their own claims resolution protocol, and MasterCard is soon to release something similar. To win chargeback disputes, your team must stay up-to-date on reason codes. Make sure your team is aware of the evidence you need to fight the type of chargeback associated with each reason code.

5) Not creating a template

If you’re like most merchants, your first chargeback dispute won’t be your last! Make chargeback disputes faster and more efficient by creating a template. That way, your team can quickly and easily enter relevant evidence — like the product or service, transaction history, purchase flow, and communication with the customer — each time a dispute comes up.

6) Not working with your credit card processor

Your credit card processor has far more experience dealing with chargebacks than you do. They also stand to benefit from winning a chargeback dispute as much as you do, so they’re investing in your win. Work with your processor to make sure you’re leveraging the right tools and resources to fight back.

7) Not checking whether the acquirer is involved

Some chargeback disputes are handled by the acquiring bank: the financial institution that maintains the merchant’s bank account. Some businesses dispute chargebacks without realizing that the acquirer is taking care of it for them. It’s important to understand which chargebacks qualify for automatic representment. For example, the acquiring bank will typically help out with a chargeback dispute if the chargeback was the result of a processing error.

8) Not tracking metrics

To succeed at scale, it’s important to keep an eye on your chargeback metrics. A chargeback rate over 1%, for example, could indicate that fraudsters are using your site to test stolen credit cards, or that your customers are experiencing account takeover attacks. If your rate stays above 1%, most credit card companies will label you a high-risk merchant and enroll your business in a chargeback monitoring program. These programs are no joke. Mastercard’s program requires the merchant to regularly report on their activity — and they charge between $300 and $500 for each report.

It’s also important to keep an eye on your win/loss rate to make sure you’re fighting effectively. A low win rate might indicate that you need to reallocate resources or make personnel changes. If the problem persists, your acquirer is liable to stop doing business with you.

9) Not paying attention to trends

Merchants stand to learn a lot from chargebacks. They can be a clear window into how users are experiencing your site. But you won’t learn anything if you’re not tracking each chargeback dispute from beginning to end. Consider keeping track of metrics such as the number of chargebacks over time and reasons customers are filing chargebacks. For example, an increase in chargebacks may point to elevated fraud. If you see a high volume of customers filing chargebacks because they didn’t think they would receive a shipped item, you might consider making changes to your shipping page or policies.

10) Not investing in fraud prevention

The old adage is true: the best offense is a good defense. If you don’t want your team and resources bogged down in chargeback disputes, why not stop chargebacks before they happen? Invest in a robust fraud prevention solution to keep your fraud rates low and your fraud team lean. It also frees up your team to do deep-dive investigations into larger fraud rings.

To win a chargeback, you need to include strong evidence – but what exactly does that mean? Get started with this checklist to make sure you’re creating comprehensive evidence documents for every chargeback.

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Roxanna "Evan" Ramzipoor

Roxanna "Evan" Ramzipoor is a content marketing manager at Sift. Her debut novel The Ventriloquists will be released August 27, 2019.