The industry average for chargeback win rates is 30%.
The former is when the actual cardholder makes a purchase using the card, but claims the transaction was fraud. The latter is when another person uses the cardholder's card without their permission.
Compelling evidence: If you have strong compelling evidence that shows the customer's dispute is unwarranted, then you have a good chance of winning the chargeback dispute and keeping the sales revenue (because the consumer won't receive the chargeback refund).
Chargeback can be a very effective way of getting a refund – yet it is important to understand that, in practice, you are disputing a payment.
On average, merchants win approximately 32 out of every 100 chargebacks they decide to contest. This means that if you're a merchant dealing with 100 chargebacks, you can typically expect to successfully recover funds from around 32 of those disputes.
Can a Chargeback Be Denied? Yes. If the cardholder doesn't make a compelling enough case to their bank, or doesn't have a valid reason for filing a chargeback, the bank may refuse to open a dispute. Merchants can also provide evidence refuting a chargeback.
Dispute Chargeback
Original sales slip. Invoice. Proof of delivery of goods or services. A copy of the refund policy for nonrefundable fee.
How do banks investigate charges? Banks hire full-time fraud professionals to investigate suspicious, unusual, and unauthorized transaction activity. These specialists analyze transaction data, monitor rules-based fraud detection information, and respond to fraud tips or disputes submitted by cardholders.
Loss of revenue: Chargebacks result in a direct loss of revenue for merchants, as they have to refund the disputed amount to the customer.
While there isn't a guarantee to win a chargeback dispute as a seller even if you are in full rights, there are some steps that you can take to increase your chances significantly.
Disputing chargebacks that are high-value transactions can help you recover substantial revenue. Let's take a $500 order disputed as fraudulent, this alone is worth the effort because of the substantial revenue that can be recovered.
If the claim is invalid, the dispute will go no further and no chargeback will occur. Most banks, however, extend the benefit of the doubt to their customers and will allow the chargeback in most cases, so long as the customer's reason for the dispute falls under one of the approved categories.
Merchants win chargeback disputes approximately 20-30% of the time, though this success rate can vary widely based on factors such as the industry, the quality of the evidence presented, and the specific reason for the chargeback.
While they may be frustrating to deal with, chargebacks are not illegal when customers feel they have a legitimate dispute. However, chargeback fraud—such as when a customer intentionally abuses the chargeback process or knowingly falsely reports a legitimate transaction for a chargeback—is a type of fraud.
Most Common Reason for Disputes
Four different categories are used to classify chargebacks. These categories vary slightly based on the card brand but can generally be thought of as fraud, cardholder disputes, authorization issues, and processing errors.
Chargebacks can be a significant burden for merchants as they result in financial losses, are time-consuming, increase costs, and increase the risk of fraud: Financial loss. A chargeback results in a direct financial loss for you, as you have to repay the disputed amount and a chargeback fee.
During the chargeback process, the acquiring bank receives notification of the chargeback from the issuing bank. The acquiring bank decides to accept or dispute the chargeback. When the decision is to dispute, the merchant is informed, too often with limited time to build their chargeback representment case.
What if my claim is refused? If your claim is refused and you don't get your money back, contact your card provider as they may be able to give you more details about why this has happened. If you're not satisfied with this, you may be able to refer your dispute to the Financial Ombudsman Service (FOS).
Banks and law enforcement can use transaction details, surveillance footage, and digital tracking methods to identify the perpetrator, with various results.
What's the Time Limit for Filing a Chargeback? Each card network and issuing bank sets its own time limits for filing a chargeback, but U.S. law sets a minimum time limit of 60 days. Most banks give cardholders 120 days to dispute a charge.
Merchants carry the 'burden of proof' in chargeback disputes: In a chargeback scenario, merchants must identify the item, date, amount, and buyer. Merchants are required by law to respond within 30-45 days or the chargeback is automatic.
You might not always get a fair outcome when you dispute a chargeback, but you can increase your chances of winning by providing the right documents. Per our experience, if you do everything right, you can expect a 65% to 75% success rate.
If your dispute is denied, the charge will go back to your credit card. You should receive an explanation from the credit card issuer detailing the reason the dispute was denied. If you refuse to pay, they can put your account in collections or seek legal action.
Cost to merchant: Banks initiate chargebacks at the request of the cardholder, and are responsible for retrieving the funds from the merchant's account and returning them to the customer. In contrast, a refund involves the merchant voluntarily repaying their customer.