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How to Stop Unnecessary Chargebacks from Happening

They may be impossible to completely absolve, but there are a lot of unnecessary chargebacks that can happen, causing damage to your business that could have been completely avoided. This article will help inform you on how to reduce chargebacks like these from happening. 

The Importance of Chargeback Management 

For ecommerce businesses, chargebacks will always be a constant threat that will never fully go away. Anytime there is an opportunity to make a payment without a credit card being physically present, you can count on there being malicious attempts to make that payment or exploit the process in some capacity. 

Not only is it difficult to stay abreast of new forms of fraudulent attacks, but if you also fail to maintain a certain chargeback threshold – you could find your ability to process online payments terminated, effectively ending your ecommerce venture. 

The good news is, with the right mitigation techniques in place, there are a significant number of chargebacks that you can prevent from ever happening. Below, we will explain three different categories, and how you can either prevent them completely or keep them to a minimum.  

Merchant Errors 

Surprisingly, it is not malicious activity that is the most common type of chargeback, but merchant errors. These are often accidental policy and procedural errors made on the merchant side, resulting in a dispute from the customer. By focusing your attention on a few key areas of your ecommerce website, you should be able to reduce these types of chargebacks from happening: 

Return Policy 

With the average ecommerce return rate hovering at 30%, businesses that aren’t adequately communicating a clear return policy face a huge risk of experiencing some unnecessary chargebacks because of the customer simply not understanding how to initiate an exchange or return with the merchant.  

Ensure that you are offering a competitive, reasonable return policy that is easily accessible for the customer to learn about on your website. Define acceptable return conditions, any key documentation that may be required for the return to go through, and most importantly – have a proper mechanism in place so that you can facilitate carrying out the return or the exchange itself.  

Product Descriptions 

It’s imperative that you are being transparent, detailed, and accurate when it comes to how you describe your product. List all of a product’s key features, and do not exaggerate what they can do. If you’re using images or screenshots to further describe your goods, they should be an accurate reflection of the product, and not a picture of an outdated model or unavailable item. 

In addition to this reducing the chances of the customer thinking they did not get what they thought they were purchasing, this also provides a better overall experience for them, and a better perception of your brand. Take your time and make sure that you’re putting proper care into your product descriptions. 

Billing Descriptor 

A chargeback may also arise if a customer sees a different description on their credit card bill that doesn’t line up with what they purchased. This can be tricky when considering that each card issuer has a different descriptor requirement, so while some customers may see a clear billing descriptor, others may not. 

Businesses should take note that there are two parts associated with their billing descriptor – the soft descriptor, and the hard descriptor. The soft descriptor is what consumers will see while the transaction is awaiting credit card authorization, and can be in this stage for several business days. The hard descriptor is what someone will see after the transaction has been approved. 

While the hard descriptor is the most significant for the customer, make sure that your soft descriptor has also been properly described, as this one is more commonly overlooked by merchants. 

Terms of Service 

Even though it is quite likely that your customers won’t read through your entire terms of service, for the sake of proper chargeback dispute management, it’s important that both your terms of service and policy pages are clearly communicated – much like your product description and your return policy. 

One example in particular is defective merchandise terms. If you don’t have anything stated on your terms and conditions about defective or malfunctioning products, you’ll never win a dispute. 

You’ll want to take the same approach with your terms and conditions as you do with the three other elements we’ve listed above; present clear information, and make it easy for the customers to find and navigate through should they be interested in actually reading your terms.  

Customer Service 

The last critical area of mitigation when it comes to determining how to stop chargebacks that are merchant-related falls under the customer service umbrella. In many cases, the shopper will attempt to take their purchase concern to you first, before going to their credit card company to initiate a chargeback. How is your business currently equipped to manage those requests? 

If you’re resorting to an automated process or limiting how quickly a concerned customer can establish some form of human contact with your business, you’re increasing your risk of a chargeback. Do a cost assessment of what it would look like to implement a customer service representative or a team, and if you already have one in place, make sure they are available to answer calls or respond to emails in a timely manner.  

Criminal Fraud 

The second – and perhaps most obvious type of chargeback – comes from unauthorized use of a customer’s credit card, better known as fraud. In these circumstances, the cardholder would likely make a claim that their credit card was charged without their consent or knowledge. 

This can happen for a variety of reasons: either the customer simply lost their card and it was inherited by someone with malicious intent, a counterfeit card is created with stolen information, or perhaps most noteworthy in the ecommerce realm an account is hacked and the payment information on file is used to make a fraudulent transaction. 

While most businesses tend to think this is the most common type of chargeback, in actuality criminal fraud-related chargebacks are quite low, with only 1-10% of a company’s overall chargebacks stemming from malicious attempts.  

When it comes to how to stop chargebacks of this nature from happening, there are three fraud filters that businesses should consider applying when collecting payment information: 

Address Verification System (AVS) 

This type of verification makes inclusion of the customer’s billing address mandatory before the purchase can happen. The address submitted is then run against the bank records associated with the credit card, and if the address is deemed to be close enough to the cardholders destination, a code is then generated, giving the merchant a clearer idea on whether or not the address is legitimate. AVS can be automated to a degree by the merchant, and it’s recommended that businesses only accept transactions that meet the proper requirement. 

Card Verification Code (CVC) 

CVC verification involves forcing the shopper to include the three-digit (or four-digit for Amex) security code listed on the back of the credit card, something that is becoming increasingly more commonplace with ecommerce transactions. This process works similarly to AVS, with one notable exception – there is no approximate assumption - the code is either correct, or it isn’t. 

Two-Factor Authentication (2FA) 

This additional layer of security that a business can apply requires the customer to authenticate their purchase. The way this is done can vary: either they are sent an email requiring them to confirm their purchase, they are sent a text message with a numerical code that must be entered, or they are required to use a mobile application to enter a randomly generated code that expires after a short duration of time. This type of authentication is highly recommended when you’re storing payment information via a user’s account, so that in the event that a customer’s password is compromised, a criminal can’t then go and make a bunch of purchases using the card on file. 

Friendly Fraud 

Believe it or not, criminals are not the only fraudulent types of chargeback a business has to deal with. There are also unintentional (for the most part) types of fraud that can occur as well. These types of incidents are known as friendly fraud. Friendly fraud is expected to total roughly $25 billion this year, making it a very important element you need to consider when determining how to stop chargebacks. 

This typically occurs when someone makes a claim stating that the charge, they received on their credit card statement was not authorized by them, even if that isn’t true. They may also decide that they no longer want the product and initiate a chargeback instead of going directly to the merchant to initiate a refund or an exchange. 

Some of the mitigation tactics that were mentioned earlier to combat merchant error-related chargebacks can also help minimize friendly fraud attempts, like stating an easy-to-understand refund policy, an accurate product or service description, and having a clear billing descriptor. In addition to these, here are some additional safeguards to deploy: 

Order Notification 

Whenever an order is placed, it is good business practice to notify the customer immediately so that they’re not only being made aware of their transaction, but you’re leaving a digital trail that proves you made a reasonable effort to notify them of their purchase. Make sure these notification emails contain all of the product and purchase information. Additionally, if you’re collecting a recurring payment, notifying users when they are nearing their next payment cycle, as well as when payment has gone through is highly recommended. In case of a delay – for whatever reason – in shipping the product to the customer, that should also be clearly communicated. 


When delivering a physical product, particularly products that are higher-priced items, businesses that make a delivery signature mandatory will make it much more difficult for the customer to dispute should they attempt to initiate a chargeback. 

Even if you’re selling a digital solution or service, there are ways to capture a customer’s signature online without them needing to be physically present. Consider using a third party signature capturing solution like DocuSign or PandaDoc so that you have a signed contract or purchase safely stored within your archives should you need to provide them if a chargeback is initiated. 

Blacklisting Recurring Culprits 

While blacklisting should be taken very seriously and not something a business dishes out too liberally, with customers who successfully file their first chargeback becoming 2-3 times more likely to do it again, there must eventually come a time where businesses put an end to these recurring threats.  

Analyze your transactional data to get an idea of who may be initiating multiple chargebacks, and blacklist these negative customers so that they do not continue to exploit your business. Before doing this, however, make sure that you are measuring what the cost would be to lose this customer forever versus the cost of dealing with their chargebacks. 

The Outsourced Approach 

Now that you have a better idea of some of the tools at your disposal to fight off chargebacks, the next question is: how many of these are actually feasible to do? Not all businesses have a large amount of staff and resources to assign to dealing with chargeback disputes. 

If you’re wondering how to stop chargebacks without allocating additional resources to deploy some of the tips we mentioned, you could also consider outsourcing this entirely to a team of professionals. 

The Origins Ecommerce platform is not only built to assist you with all of your payment processing needs, but it also offers automated tools to help you better manage and mitigate your chargeback rate. We will also take the time to understand the products and services you’re offering, as well as overseeing your transactional data so that when a chargeback does occur, we are already working hard for you to contest it, allowing you to reallocate your time and focus more on what matters the most…your business. 

To learn more about how Origins Ecommerce can help you stop chargebacks, or to get a better idea on all the additional ways we can enhance your ecommerce business, please contact our team. We’ll be happy to answer any questions you have. 

About the Author

Origins Ecommerce

We love sharing our expertise in online payments and helping our customers succeed. From the technical team to our customer service team, everyone at Origins Ecommerce is ready to support your success. Our goal is to reduce your expenses and risks while optimizing your revenue, by managing your online payments for you. The Origins Ecommerce payment solution is there to keep your payments in motion, so you don’t have to.
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