How to Maximize Your Chances of Winning a Chargeback


Dealing with credit card chargebacks can be a time-consuming endeavor for online businesses. Merchants risk having their merchant accounts terminated by their acquiring bank if they experience frequent chargebacks. Chargebacks can cost a merchant more than just lost sales; those losses combined with associated fees can result in a business closing shop.

Merchants can dispute a chargeback and attempt to win a chargeback reversal in order to save the value of the transaction. But there is no proven process for winning, and there is no way to guarantee success. Before deciding whether or not to enter into fighting a chargeback dispute, a merchant should consider:

  • Disputing a chargeback is tedious, time-consuming, and labor-intensive. If the cost of investigating the claim is more than the amount of the transaction, it may be less expensive to not dispute the chargeback.
  • Some chargebacks can be clearly identified as mistakes that will be easy to prove, such as when the name of the company is different on the credit card statement and the customer doesn’t recognize the transaction. Other claims, such as a customer who says an item was not as described or if the claim is fraudulent, are more difficult to prove.
  • Merchants who regularly dispute chargebacks should try to understand the cause of the chargebacks and work to lower their chargeback-to-sales ratio. Merchants who have a chargeback-to-sales ratio that is too high may be placed into a chargeback monitoring program. If monitoring shows that they are unable to successfully dispute and win chargebacks, a merchant acquirer may terminate their relationship with the merchant.
  • The chargeback complaint may actually be true. Not all chargebacks are filed by dishonest customers. If a customer is dissatisfied and can’t get the issue resolved due to poor customer service, they may file a chargeback. If the merchant disputes it and then the customer’s claim is proven valid, the merchant’s reputation may be tarnished.

Merchants should do everything they can to prevent chargebacks from being filed. But no matter how vigilant you are, chargebacks can never be stopped, so preparation and anticipation are key. Winning a chargeback dispute is difficult, but not impossible.

Documentation is Vital

The most important pieces of information merchants can provide during a chargeback dispute are an explanation of why the dispute is unwarranted and the actual documents supporting the validity of a transaction. The merchant should send a confirmation e-mail after the completion of every purchase that includes information such as details of the transaction, an automated invoice, shipping information, terms of purchase, how to contact customer service, and how to return an item. Once the item is shipped (or delivered, in the case of a digital item), the merchant should send a follow-up e-mail containing tracking or delivery details when possible. For expensive items, the merchant should require the customer to provide a signature to confirm delivery.

Documentation of a merchant’s policies is also critical to winning a chargeback dispute. Merchants must establish clearly-defined terms and conditions that explain how they do business with their customers and what is expected from both parties. Sellers should provide detailed product descriptions so customers know exactly what they are buying before making a purchase. Online merchants should develop chargeback prevention policies, such as details about how they handle returns, replacements, and order cancellations, and post them on their websites. Merchants can require to click an icon or check a box at checkout to acknowledge having read them.

Proper documentation of a sale can also help merchants in fighting friendly fraud chargebacks. Working with a shipping service that includes a tracking system—preferably one that requires a signature as proof of delivery—can prove that a customer did receive purchased goods. Communications to and from a customer in regard to a purchase can assist in proving that a product was delivered.

The Steps in the Chargeback Process

Once you have gathered documentation to support your claim, be sure you thoroughly understand what the chargeback process entails. The process involves multiple steps, so learn as much as you can about what happened, what happens next, and what the possible outcomes will be.

  1. The cardholder contacts their issuing bank to dispute a transaction.
  2. The issuing bank reviews the request. If they decide the cardholder’s claim is invalid, the bank responds to the cardholder explaining why they are unable to open a chargeback. If they decide an error may have occurred, they proceed with filing a dispute.
  3. A provisional refund is issued to the cardholder’s account.
  4. The issuing bank sends the merchant’s bank a reason code for the chargeback. The reason codes generally fall into one of these categories: technical, quality or fraud.
  5. The merchant’s bank reviews the claim and notifies the merchant of the impending chargeback. The merchant’s bank may fight the dispute on behalf of the merchant, in which case the claim would never reach the merchant for a response.
  6. The merchant can accept the chargeback or choose to fight it. If the merchant decides to dispute it, they will need to gather documentation such as copies of the return policy, e-mail communications, signed receipts, or other forms of proof that the transaction was valid. These documents should be accompanied by a well-written, persuasive chargeback rebuttal letter explaining your case for why the chargeback claim is invalid.
  7. The merchant’s bank reviews the information submitted by the merchant. If the bank believes the evidence is sufficient, the chargeback will be presented back to the issuing bank electronically. At this point, the acquirer returns the funds to the merchant’s account.
  8. The issuing bank then reviews the information presented by the merchant’s bank. If the bank believes the merchant is correct, the cardholder will once again be billed for the transaction. The support is sent to the cardholder regardless of whether the issuer debits the cardholder’s account again.
  9. With either outcome, each party has the option to submit the chargeback debate again. This option is lengthy and costly, and usually more expensive than the original cost of the item that was purchased. There are additional fees involved for reviewing and arbitrating that must be paid by the merchant regardless of whether the merchant wins or loses the dispute.

In most cases, instead of taking the case to arbitration, the more effective option is to work with your acquirer to understand what you could have done differently to prevent the second occurrence of the dispute and to gain insight on how to avoid disputes in the future. Arbitration can be very costly for merchants, so working with your acquirer will usually provide a much better return because you can address all future disputes and hopefully minimize second-stage disputes.

The chargeback process can affect the bottom line for merchants. There is no way to anticipate a chargeback, so a proactive approach in preparing for them can be more successful than a reactive one. Provide excellent customer service, maintain clear documentation, keep records of all customer interactions, and become familiar with the chargeback process.