How to Fight a Chargeback and Protect Your Business

A chargeback is a reversal of funds for a credit or debit card transaction, initiated by a cardholder through their bank. This process exists primarily as a consumer protection mechanism, safeguarding cardholders from unauthorized charges, fraudulent activity, or issues with products and services. While chargebacks protect consumers, they can significantly impact businesses by leading to lost revenue, additional fees, and potential damage to a merchant’s reputation with payment processors. Recovering these losses and protecting business standing often necessitates fighting illegitimate chargebacks.

Understanding Chargeback Reasons

Chargebacks occur for various reasons, and understanding the specific cause is the first step in preparing a dispute. Each chargeback comes with a reason code, which indicates the cardholder’s justification for the dispute. These reasons fall into categories such as fraud, service or merchandise issues, and processing errors.

Fraud-related chargebacks can stem from unauthorized transactions where stolen card information is used, or from “friendly fraud.” Friendly fraud happens when a customer disputes a legitimate charge, sometimes due to not recognizing the business name on their statement or forgetting a recurring subscription. Service-related chargebacks arise when a customer claims they did not receive the product or service, or that it was damaged, defective, or not as described. This can include issues like delayed delivery or receiving counterfeit goods.

Processing errors, such as duplicate billing or incorrect transaction amounts, also lead to chargebacks. If a customer is charged more than once, or if a canceled subscription continues to be billed, they may initiate a chargeback to correct the mistake. Understanding these reasons is important because the type of evidence needed to dispute a chargeback depends directly on the reason code provided.

Preparing Your Chargeback Rebuttal

Preparing a chargeback rebuttal involves gathering specific evidence and structuring a clear argument. The goal is to provide compelling evidence demonstrating the transaction’s legitimacy and that your business fulfilled its obligations. Required documents vary based on the chargeback reason code.

For non-receipt of merchandise, proof of delivery (tracking, signed receipts, photos) is important. For unauthorized transactions, evidence like IP addresses, device fingerprints, and successful AVS or CVV checks can prove the cardholder initiated the purchase. Customer communication logs (emails, chat transcripts) are valuable for almost any dispute, showing agreement to terms, delivery confirmations, or attempts to resolve issues.

Other evidence includes itemized transaction receipts, records of prior undisputed transactions with the same customer, and signed contracts. For digital goods, usage logs demonstrating product access are important. Once compiled, evidence should be organized and presented with a rebuttal letter. This letter should identify the transaction, state your position, explain how evidence refutes the claim, and request chargeback reversal.

Submitting Your Dispute

Once your chargeback rebuttal package is prepared, submit it promptly. Payment card networks and acquiring banks impose deadlines for merchants to respond to chargeback notifications. Missing these deadlines results in an automatic loss of the dispute.

Response windows vary by card network, typically 10 to 45 days from notification. Visa allows 20 days, Mastercard 45 days. Most payment processors or acquiring banks provide online portals or forms for submitting disputes and supporting documentation. Use the designated method provided by your processor or bank.

Upon submission, ensure you receive confirmation of your dispute package. This confirms you met the deadline and submitted the required information. Maintaining detailed records of all submissions, including dates and confirmation numbers, is important.

Navigating the Dispute Resolution Process

After submission, the dispute enters a review phase. Your acquiring bank reviews your submission and forwards it to the cardholder’s issuing bank, which then evaluates your evidence against the original claim.

The issuing bank’s decision determines the outcome: they may uphold the chargeback (cardholder keeps funds) or reverse it in your favor (funds returned). If the issuing bank rules against the merchant or either party remains unsatisfied, the dispute can escalate to a “second chargeback” or pre-arbitration, where new evidence is presented. If still unresolved, it can proceed to arbitration, where the card network (Visa or Mastercard) makes a final, binding decision. Arbitration incurs additional fees, several hundred dollars, paid by the losing party. The entire process, from initial dispute to final resolution, can take weeks to months, with complex cases extending beyond 120 days.