Step-By-Step Guide To How to Dispute a Chargeback as a Merchant

I’ve dealt with many chargebacks as an e-commerce store owner and want to help you understand what to do as a business owner.

I’ll explain what you’ll need to give the bank, information to remember when dealing with a chargeback, whether it’s worth fighting a dispute, and tips to improve your chances of winning.

Let’s fight a chargeback.

Key Takeaways

• Document all transactions to establish a strong foundation for dispute resolution.
• Understand the chargeback process and deadlines to respond effectively at each stage.
• Craft a rebuttal letter with evidence to counter the cardholder's claims.
• Analyze chargeback data to identify patterns and improve practices to prevent future disputes.
• Weigh the costs and benefits of disputing a chargeback based on the transaction value, evidence, and impact on the business.

How to Dispute a Chargeback & Increase Your Chances of Winning as a Merchant

You’ll need to follow these steps to dispute a chargeback:

1. Build Your Representment Package: Collect evidence and write a rebuttal letter to prove the transaction was legitimate.
2. Submit Your Evidence: Submit the representment package to your bank.
3. Wait for a Decision: See whether the bank favors you or the customer.
4. Arbitrate a Chargeback: Challenge the bank’s decision and provide more evidence.

The following sections will provide more information on each of these points. Moreover, I will expand upon points that I didn’t mention in the list but are critical to know.

Let’s dive in.

1. Collect All Details

So long as you’ve decided to fight the dispute, you’ll need to start by collecting all available data on the customer and the disputed transaction. Your goal is to prove the transaction’s legitimacy to increase your chances of winning the dispute.

Folks in most industries should at least collect this information:

• Transaction details: Date, amount, authorization code
• Buyer information: Name, billing address, shipping address
• Proof of delivery: Tracking number, signature confirmation
• Communication records: Emails, chat transcripts
• Purchase history: Previous orders, returns
• IP address and device information: For online transactions

The specific evidence you’d collect will vary by business model, industry, and chargeback type.

For instance, if I sold Japanese pop-culture products, I’d want the above evidence in addition to:

• Product details: Item description, images, price, SKU, and any relevant product identifiers.
• A copy of my return/refund policy: Outlines terms and conditions.
• A copy of my website terms: Outlining the purchase agreement between the merchant and customer.
• Proof of authenticity: Documentation or certifications verifying the authenticity of the products sold, especially for limited edition or collectible items.
• Inventory records: Records showing the availability of the product at the time of purchase and any subsequent inventory changes.

Conversely, a subscription-based service might gather cancellation confirmations.

Avoid collecting any unnecessary personal information or data that violates applicable data collection and privacy laws. This could get you into legal trouble.

Summary: Gather transaction and customer data to substantiate the legitimacy of transactions and facilitate chargeback disputes.

2. Write a Rebuttal Letter

A rebuttal letter is a document that merchants send to the bank as a part of the representment package. It explains why the chargeback is invalid and supports the merchant's case.

Here’s what I typically include in my letters:

• A concise summary of the transaction: This includes the date, amount, and a description of the goods or services purchased.
• Chargeback reason: State the specific reason code provided by the customer for the chargeback.
• Argument against the chargeback: Explain why the chargeback is invalid and provide a counterpoint.
• A request for the bank to overturn the chargeback: State that you are requesting the bank to reverse the chargeback and credit the disputed amount back to your account.

Aim to make this letter at least 1 page long.

Don’t exceed 2 pages, otherwise, you may overwhelm the bank. Because they also need to expand resources to deal with resources. You’ll provide all of the other details the issuer requires with your evidence.

Summary: Rebuttal letters are a part of your representment package and explains your perspective in the dispute. It does not need to be more than 1 or 2 pages.

3. Understand the Chargeback Process & Deadlines for Each Stage

It’s essential to understand every step of the chargeback process and their deadlines. Otherwise, failure to submit evidence in the right amount of time can result in a loss of the chargeback.

4. Submit Evidence to Your Acquirer

Now, you’ll need to submit your representment package to your bank (acquirer bank). They will forward it to the customer’s issuer bank to review.

The way to deliver the representment package will vary by bank. Ask your representative how to submit your package.

This package will include the rebuttal letter and your evidence, and in some cases, a chargeback debit advice letter. This letter details the specific reason for the chargeback. It also provides any required documentation.

If you hire a chargeback analyst (in-house or a freelancer), they’ll gather all of your evidence and submit the package on your behalf.

Summary: Submit a representment package, including a rebuttal letter and evidence, to their acquirer bank to dispute a chargeback.

5. Wait for the Final Decision & The Aftermath

The bank reviews the representment package and makes one of these decisions:

1. Upholds the chargeback: The bank agrees with the customer, and the merchant loses. If the merchant disagrees, they can initiate pre-arbitration or arbitration (depending on the card network and reason code).

You’ll need to submit additional evidence and arguments to a card network representative or an independent arbitrator.

2. Reverses the chargeback: The bank agrees with the merchant and returns the disputed funds. If the cardholder disagrees, they can initiate a second chargeback, leading to pre-arbitration.

You’ll need to prepare yourself with, again, additional evidence.

3. Escalates to pre-arbitration: The bank requests more information from both parties or if the cardholder provides new evidence after an initial reversal. This is a second chance for you to submit evidence.

4. Escalates to arbitration: You must prepare a comprehensive arbitration package, including all relevant evidence and arguments, and submit it within the card network's deadline. You’ll also need to pay an arbitration fee.

The arbitrator's final ruling is binding, which means no party can challenge the chargeback further from this point.

Summary: Your response to the bank's decision depends on the outcome. Be prepared to escalate the dispute, submit additional evidence, or accept the decision.

Is a Chargeback Worth Pursuing? It Depends

With my business, I would consider these factors when deciding whether it’s worth fighting a chargeback:

1. Financial Value of the Transaction: Is the disputed amount substantial enough to justify the potential costs and resources required for a dispute?

Here’s a table that I found with chargeback win rates for different price points [1]:

Many fraudsters will go for higher-value items. Thus, you will likely encounter more instances of true fraud with more expensive items. And as we’ve discussed, the win rates for that type of fraud aren’t high for businesses.

2. Cost of disputing the chargeback: Factor in potential costs such as:

• Retrieval request fees
• Chargeback fees
• Arbitration fees
• Expenses related to staff time
• Costs for chargeback management tool
• Chargeback analyst costs

Then there’s the higher cost of chargeback fees if you end up on a card network’s monitoring program.

For instance, the Visa Dispute Monitoring Program (VDMP) will charge $50 per chargeback and up to a $25,000 review fee if you have a certain chargeback threshold.

3. Strength of evidence: Does your documentation demonstrate the validity of the transaction and refute the customer's claim?

If not, you will waste your time and resources attempting to fight a dispute.

4. Customer history: A history of frequent chargebacks from a customer may indicate a higher likelihood of fraud or abuse. Giving you more evidence to present to the bank.

5. Potential impact on chargeback ratio: A high chargeback ratio can lead to increased processing fees, stricter monitoring, or even termination of your merchant account. If your chargeback ratio is high, you will want to fight a dispute.

6. Time and resources required: Evaluate the time your staff will spend gathering evidence, communicating with the bank, and managing the dispute process. If it’s not worth fighting a dispute, you could use those resources for growing your business.

7. Reason for chargeback: Certain chargeback reason codes may be more difficult to dispute or may show underlying issues with your business practices.

For example, a chargeback for "not as described," which can be subjective, might be harder to dispute than one for "canceled recurring billing" where clear documentation of the cancellation process exists.

Summary: Weigh various financial, logistical, and risk-related factors when deciding whether to dispute a chargeback.

Tips to Improve Your Odds of Winning

Here are some rules and strategies I used to improve my chances of winning disputes while preventing some future chargebacks:

1. Maintain comprehensive records for every purchase. Include order specifics, communication, and proof of delivery.
2. Use clear billing descriptors. Ensure customers recognize charges on their statements.
3. Verify customer identities. Use AVS and CVV for card transactions.
4. Respond to chargebacks promptly. Meet card network deadlines.
5. Use clear language in dispute responses. Address the reason with evidence.
6. Analyze chargeback data regularly. Identify patterns and areas for improvement.
7. Ensure product descriptions match the actual items. Avoid misleading information.

The most important thing we could do to win disputes is to prevent them from escalating into chargebacks. Talk to customers and see what you can do to improve their experience with your store. If they requested a refund, offer a refund.

And what if customers don’t go through your customer service for refunds?

Use tools that alert you whenever a customer initiates a refund with their bank. That way, you can automatically (or manually) initiate a refund before they escalate to a chargeback.

We partner with major alert providers like Visa Rapid Dispute Resolution (RDR) and can help reduce the number of chargebacks you face.

Summary: Enhance chargeback dispute success through documentation, swift responses, proactive customer service, and fraud prevention.

Conclusion

Dispute chargebacks by collecting comprehensive documentation, crafting a compelling rebuttal letter, and submitting a representment package to their acquiring bank within specified deadlines.

You’ll need tools to prevent disputes from escalating to chargebacks. We offer such a tool, which can save your business money otherwise wasted on chargebacks. Learn more now.