How to reduce chargebacks

Chargebacks are the main reason merchant accounts are closed. Visa and Mastercard monitoring programmes have hard thresholds — around 0.9–1% of transactions — and exceeding them triggers fines, then termination. The good news is that most chargebacks have identifiable causes.

1. Fix the descriptor

"I don't recognise this charge" is the single most common dispute reason. Your billing descriptor should show your brand name as customers know it, plus a phone number or URL. Check it on a real bank statement.

2. Communicate before you bill

For subscriptions, send a renewal reminder before charging. Card-scheme rules require this for many models anyway. Make cancellation as easy as sign-up.

3. Set delivery expectations

Confirm orders immediately, provide tracking, and tell customers when to expect delivery. "Item not received" disputes mostly come from silence.

4. Use pre-dispute alerts

Services such as Ethoca and Verifi notify you when a cardholder contacts their bank, before a chargeback is filed. Refund within the window and the dispute never counts against your ratio. This is the highest-impact single tool available.

5. Screen for fraud

Fraud chargebacks are avoidable with velocity checks, AVS/CVV matching, device fingerprinting and 3-D Secure 2, which also shifts liability to the issuer.

6. Refund fast

A refund costs the transaction. A chargeback costs the transaction, a fee, and a mark against your ratio. When a customer complains, refund quickly unless you have a strong reason not to.

7. Represent what you can win

Not every dispute should be fought, but those with clear evidence (signed delivery, login records, prior communication) should be. Winning does not reduce your ratio, but it recovers revenue.

8. Measure by cause

Track chargebacks by reason code, product and acquisition channel. Patterns appear quickly — a specific affiliate, a specific SKU — and can be addressed at source.