Chargeback Prevention: A Merchant's Toolkit

Why Chargebacks Matter

Chargebacks are more than lost revenue. They trigger fees ($25-100 each), damage your ratio with card networks, and can lead to account termination. Prevention is always cheaper than cure.

The Chargeback Ratio

Card networks monitor your chargeback ratio (chargebacks / transactions). Thresholds vary by network and MCC:

Visa: 0.9% threshold for monitoring program
Mastercard: 1.0% threshold
High-risk MCCs: often lower thresholds

Prevention Strategies

1. Clear Communication

Recognizable billing descriptors
Purchase confirmation emails
Easy-to-find contact information
Clear refund policy

2. Fraud Prevention

Address Verification (AVS)
CVV validation
3DS authentication
Device fingerprinting
Velocity checks

3. Alert Services

Verifi (Visa) and Ethoca (Mastercard) provide alerts when customers initiate disputes. You can refund before it becomes a chargeback.

4. Customer Service

Responsive support prevents chargebacks. If customers can reach you easily, they'll contact you before their bank.

Fighting Chargebacks

When prevention fails, you can contest chargebacks with evidence:

Proof of delivery/service
Customer communication
Transaction documentation
Signed agreements

Chargeback Reason Codes

Understanding why chargebacks happen helps prevent them:

Fraud: Improve fraud detection
Not recognized: Better billing descriptors
Product not received: Tracking and confirmation
Not as described: Accurate product descriptions
Duplicate: Transaction monitoring

Key Takeaways

Prevention is always cheaper than fighting chargebacks
Clear billing descriptors prevent recognition issues
Alert services catch disputes before they become chargebacks
Good customer service reduces friendly fraud
Monitor your ratio and act before hitting thresholds