Fighting Credit Card Chargebacks Like an Expert (2024)

Chargebacks are a significant and growing problem for merchants, especially in the e-commerce sector. The past few years have seen even more retailers and customers make the leap to online shopping, andthose who seek to abuse the chargeback system for their own benefit have been on a feeding frenzy. If left unchecked, chargebacks can not only drain revenue, but can also put a merchant's account at risk of termination.

To get their chargeback problems under control, merchants need to avail themselves of a defensive strategy that includes both preventing chargebacks ahead of time and fighting them after they’ve been filed. While prevention is always more efficient than any after-the-fact remedy, some chargebacks are very difficult to predict and prevent—in particular, the chargebacks that fall under the category of first-party misuse, or “friendly fraud.” Merchants can fight these chargebacks, win their cases, and take their revenue back.

In order to successfully fight chargebacks, merchants need to maintain thorough records of each order, craft a convincing rebuttal letter, and support it with compelling evidence. How can merchants use these tools to maximize their chances of winning credit card disputes?

  1. How Do Credit Card Chargebacks Affect Your Business?
  2. How Can Merchants Fight Credit Card Chargebacks?
  3. What Is a Chargeback Rebuttal Letter?
  4. What Constitutes Compelling Evidence for Fighting Chargebacks?
  5. Examples of Good Supporting Documentation for Representment
  6. Advanced Chargeback Fighting Techniques
  7. How Do You Fight Friendly Fraud Chargebacks?
  8. What Does it Take to Prevent Chargebacks Before They Happen?
  9. Does a Chargeback Hurt You Even if You Win?

How Do Credit Card Chargebacks Affect Your Business?

Credit card chargebacks cost businesses their revenue and increase their chargeback rate, which can have serious consequences if it reaches 1%. The tricky thing about chargebacks is that even if you win the dispute, they can still affect you negatively.


When a cardholder disputes a charge and you either accept the chargeback or lose the dispute, you don't just lose the product and the sale, you lose the marketing costs, the sales costs, the overhead costs, and the fees as well. A chargeback can cost a merchant more than double the amount of the original transaction.

Fighting Credit Card Chargebacks Like an Expert (1)When you have too many chargebacks on your record, banks and credit networks will begin to see the problem as originating on your end. In order to establish a threshold for what counts as “too many,” they look at your chargeback ratio, the number of chargebacks you have in proportion to your monthly transaction total. If that number climbs too high, you may face fines, restrictions, or even termination of your merchant account.

Fighting chargebacks and getting them reversed is not guaranteed to lower your chargeback ratio or get the fees you paid refunded, but it does allow you to recover the disputed transaction amount. Most importantly, it takes you off the list of easy targets that fraudsters share with each other. Merchants who passively accept fraudulent chargebacks are frequently victimized over and over againby those who seek to abuse the chargeback system for financial gain.

Another benefit of fighting chargebacks is that it gets you in the habit of researching and analyzing your chargebacks. This is an essential practice for determining the root causes of your chargebacks, giving you important insights into how you can make changes to your policies and operations that will help to prevent future disputes.

How Can Merchants Fight Credit Card Chargebacks?

Merchants can fight credit card chargebacks by submitting a rebuttal letter explaining their case along with compelling evidence to support it. This process is called representment. The issuing bank will review the case and make a decision.


Simple enough, right? In practice, however, fighting chargebacks is both an art and a science. There's no one template that works for every issuing bank. While they have similar guidelines and requirements, each one makes decisions differently.

Even though the card networks dictate the rules for reversing or upholding chargebacks, not all issuers interpret these guidelines in the same way. Two different issuing banks can look at the same set of documents and arrive at two completely different decisions.

Smaller banks are a bit notorious for this—they have one-on-one relationships with some of their customers, and that can influence their decision to side with them over the merchant.

This can't always be helped. 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.

What Is a Chargeback Rebuttal Letter?

Rebuttal letters are a key ingredient in successful chargeback representment. Their purpose is to concisely explain the broad outline of the dispute, refute the cardholder’s dispute claims, and persuade the issuing bank to reverse the chargeback.


Brevity is your friend here. Think of it like being in front of a judge with two minutes to present your case. Your rebuttal letter should let the issuer know what your obligation to the customer was, whether you met that obligation, what communications transpired between you and the customer, and whether you ultimately refunded their money or not.

Fighting Credit Card Chargebacks Like an Expert (2)The rebuttal letter should fit on one page, running no longer than about 200 words. It needs to be sharp and precise, so that the person reading it can understand it quickly.

Your letter should also itemize the supporting documents you're including and reference your chargeback case number on the upper left side of the page. Make sure your letter and supporting documents are in black and white — most banks will scan them and convert them to grayscale upon receipt, and color printing can cause legibility problems.

What Constitutes Compelling Evidence for Fighting Chargebacks?

When you look up a chargeback reason code, it should tell you exactly what type of evidence is needed to get the chargeback reversed. Evidence can be considered compelling when it clearly matches the criteria specified by the card network.


Examples of compelling evidence might include the results of fraud prevention checks and customer authentication methods, records of previous purchases, and case-specific evidence like delivery confirmation.

If you're going to enter chargeback representment, the first thing you need to do is make sure you have records of an AVS and CVV match for the transaction. Without that, you won't be able to win most disputes.

In order to have that information, as well as all the other evidence you'll need to successfully fight a credit card chargeback, you'll need to keep thorough records of every order you accept.

Make sure the evidence you include is relevant to the reason code for the chargeback. Every chargeback representment case goes to a person who manually examines the evidence. Don't assume that these bank employees have a lot of time to review and ponder the information they're given.

Think about how you can provide an explanation and evidence that can be read and understood within about five minutes. You need to give the person reviewing your case only what they need to make the right decision in a short amount of time.

If you send along twenty or thirty pages of evidence, you're going to lose. Nobody has time to read that, and whoever is reviewing your case is more likely to get lost in the unnecessary detail than see it as proof of your case.

Examples of Good Supporting Documentation for Representment

Here are some examples of other documents you may want to submit:

  • A transaction receipt. You can obtain this from your payment gateway. It should confirm the AVS and CVV match, showing that the cardholder really is the same person who made the transaction. Stolen cards will rarely match both.
  • The order invoice. Make sure it fits on a single page. It should specify what was sold, when the sale was made, who the customer was, and should contain a billing address, shipping address, and tracking number.
  • Tracking confirmation. The issuing bank won't have time to look up the tracking number, so make sure you look it up yourself and print out confirmation that the parcel was delivered to the purchaser. If the dispute involves digital goods, try to provide some kind of information that confirms that the customer actually received and used the product.
  • Your website's terms and conditions. Don't print out the irrelevant parts, just the specific sections that pertain to the chargeback dispute. Highlight selected passages for clarity if needed.
  • A copy of your checkout page. This should show proof that the customer checked a box indicating that they agreed to your terms and conditions.

Advanced Chargeback Fighting Techniques

No single template will fit every dispute or be equally compelling to every issuing bank.

Over time, you can learn what kinds of letters and documents are effective for which banks. Not sure what bank you're going to be dealing with in a chargeback dispute? The first six digits of the customer's credit card number can tell you.

If you find yourself consistently losing disputes with a particular bank, adjust your letter and the ways in which you format your supporting evidence. You can do A/B testing to determine what type of approach works best for that particular bank. (We told you fighting chargebacks was an art and a science!)

With time, experience, and experimentation, you can increase your win ratio and become a true master at fighting chargebacks. Of course, if you don't want to wait that long, you can always enlist the help of a professional chargeback management company to fight your chargebacks for you and find ways to prevent them from happening in the first place.

A chargeback management company will have more experience fighting chargebacks than any merchant, giving them a wealth of data on the quirks and preferences of most major issuing banks. They can use this data to achieve a greater level of success in representment, recovering more revenue for the merchant.

FAQ

How Do You Fight Friendly Fraud Chargebacks?

Collect your evidence, write a compelling rebuttal letter, and speak to the concerns of the issuing bank and the dispute the cardholder has raised. If the chargeback is friendly fraud, the issuing bank will have to decide based on the evidence.


What Does it Take to Prevent Chargebacks Before They Happen?

Great customer service, effective fraud prevention, and clear billing descriptors are some of the best options. Chargeback prevention alerts can also help, especially for merchants who need to reduce their chargeback ratio quickly.


Does a Chargeback Hurt You Even if You Win?

Chargebacks still affect your chargeback ratio, even if you win. Too many chargebacks, even if successfully disputed, can mark you as high-risk.


Thanks for following theChargeback Gurusblog. Feel free to submit topic suggestions, questions or requests for advice to:win@chargebackgurus.com
Fighting Credit Card Chargebacks Like an Expert (3)

Fighting Credit Card Chargebacks Like an Expert (2024)

FAQs

Fighting Credit Card Chargebacks Like an Expert? ›

How Do You Fight Friendly Fraud Chargebacks? Collect your evidence, write a compelling rebuttal letter, and speak to the concerns of the issuing bank and the dispute the cardholder has raised.

What is compelling evidence for fighting chargebacks? ›

Compelling evidence is documents that a merchant submits with a chargeback response to prove the transaction is valid or otherwise contradict the chargeback. Each chargeback has a reason code. The reason code determines which forms of compelling evidence the merchant should submit with the chargeback response.

How do you win a chargeback dispute on a credit card? ›

6 Steps for Disputing a Chargeback
  1. Step 1: Collect customer transaction details. ...
  2. Step 2: Check the deadlines for filing a chargeback dispute. ...
  3. Step 3: Gather compelling evidence for the disputed transaction. ...
  4. Step 4: Submit chargeback dispute documents by the deadline. ...
  5. Step 5: Present your chargeback rebuttal.
Oct 25, 2023

Do merchants ever win chargeback disputes? ›

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).

What are the odds of winning a chargeback dispute? ›

What are the chances of winning a chargeback? The average merchant wins roughly 45% of the chargebacks they challenge through representment. However, when we look at net recovery rate, we see that the average merchant only wins 1 in every 8 chargebacks issued against them.

How often do merchants win chargeback disputes? ›

Chargeback Win Rate

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.

Who decides who wins a chargeback? ›

If the issuing bank rules that the merchant has not provided compelling evidence, they'll rule in favor of the cardholder and the chargeback stands. The provisional credit to the cardholder becomes permanent and temporary credit reversal takes place for the merchant.

What to do if a merchant refuses to refund? ›

If asking the merchant for a refund didn't work, request a chargeback with your credit card issuer. Many card issuers let you dispute transactions by phone, mail or online. You may also be able to submit a dispute directly through your card issuer's mobile app.

What is the 540 days chargeback rule? ›

Within 120 days of the last date, the cardholder expects to receive the goods or services (not to exceed 540 calendar days from transaction). Within 120 days of the date, the cardholder was informed that the goods/services would not be provided (not to exceed 540 calendar days from transaction).

Do credit card companies investigate chargebacks? ›

The credit card company must respond to your fraud report and start its investigation within 30 days of the report. However, it can take up to 90 days to investigate the complaint. If the credit card company confirms an unauthorized party made the charge, the fraud victim will likely get their money back.

What is the compelling evidence rule? ›

In essence, Compelling Evidence 3.0 allows merchants to use a cardholder's purchase history to prove that the disputed transaction is legitimate. This expands the scope of, and specifies, what data can be used as evidence in disputes, helping merchants to reduce chargebacks, and protect their revenue.

What is compelling evidence? ›

To be compelling something needs to be really, really convincing. There should be strong evidence to support the claim. For example, you'll know your argument for a new tattoo is compelling when your parents not only let you get one but also pay for all your expenses.

Can you appeal a chargeback decision? ›

If the bank decides against the merchant, the merchant can appeal through arbitration, at which point the card network steps in to decide the case. The losing party in arbitration will be charged hundreds of dollars in fees.

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