Why do chargebacks happen?


why do chargebacks happen

Chargebacks are disputed transactions filed by credit card users. It is a form of consumer protection for the buyers so that they can get their money back if there is any fraud involved. As a merchant, you should aim to keep chargebacks to a minimum since you may get blacklisted by your payment processor.


Reasons for chargebacks

Selling products and services online tend to place a merchant at a high risk of suffering chargebacks. Chargebacks mean loss of revenue and in some cases the loss of your product that you’ve shipped as well.

Bad customers

When your customer is unscrupulous, you may get hit with a chargeback even though you’ve shipped the product to them in good condition. They can say that the product is defective or they never received it. The card issuer may just take their word for it.

Unauthorized transactions

This is quite common with credit card data being stolen all the time. You can be sure the credit card holder will dispute the charges if they didn’t buy the items in the first place. Their credit card info could have been part of a security breach at another website. You can reduce the occurrence of this sort of issues if your website enables 3-D Secure during credit card payments.

Duplicate transactions

Possibly due to a bug in the payment process or just plain human error, you may encounter a double charge on the customer’s card. Best way to get ahead of this is to check your payment transactions on a daily basis and void any duplicate charges ASAP before a chargeback is filed.

Unrecognized charges

If your payment descriptor that appears in the buyer’s credit card statement is not easily recognized as coming from your website or company then the person may file a chargeback out of worry. Easy to avoid if you use a payment descriptor that reflects your company’s or website’s name.


How to keep chargebacks to a minimum?

We’ve already mentioned some ways in the above section. Enabling 3-D Secure allows another layer of security to filter out some fraud attempts. With this enabled, the card issuer may be more likely to shift the blame to the card holder if a fraudulent transaction happens.

Checking for duplicates daily and voiding them as soon as possible is also a good practice to inculcate. Voiding is better than refunding or suffering a chargeback due to the financial penalties involved.

Always make your charges easily recognizable in the buyer’s card statement. As the charges may not appear immediately in their statement, it is easy to forget what they’ve purchased a week or 2 ago.

When it comes to bad customers and unauthorized transactions, you can rely on FraudLabs Pro’s fraud detection system to mitigate them. With a customer info blacklist, you can prevent unscrupulous customers from regularly taking advantage of your online store. Carding attempts can also be easily detected and stopped with FraudLabs Pro.



Online merchants can easily mitigate credit card frauds and bad sales by following what we’ve stated above. Best of all, FraudLabs Pro has a free tier so you can start to protect your store today.

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