How to Win Shopify Chargeback in 2024
I used to sell on Shopify and had to prepare myself for chargebacks. This guide provides all the information that I learned.
I’ll first teach you how Shopify handles chargebacks. From there, I’ll explain the essentials before fighting a chargeback. Then, I’ll talk about how to increase your winning odds.
Let’s win a chargeback.
Key Takeaways
- Shopify does not decide the winner of a chargeback dispute.
- The customer’s bank does.
- Respond within time limits to avoid automatic losses.
- You’ll submit evidence through Shopify’s chargeback portal.
- Prevention is key when it comes to chargebacks.
What Are Chargebacks & How Are They Different From Disputes?
Chargebacks are reversals of transactions. These happen when customers complain about an issue with their purchase.
No. Refunds occur when the buyer complains to the seller about a purchase and gets their money back.
The customer’s bank controls the chargeback process, which you could think of as a forced refund. Since the bank pulls the funds from the merchant’s account.
This results in a dispute process. A formal process where the merchant must prove that the transaction was legitimate. If the issuer favors the customer, they’ll reverse the chargeback.
However.
Chargebacks also come with chargeback fees on top of the costs to make, market, and sell the product. Refunds just come with a lost sale and payment processing fee.
Payment processors and card networks also don’t have thresholds for refunds. You'll pay more fees if you exceed a certain percentage of chargeback. And you’ll potentially lose the ability to process payments.
Summary: Chargebacks are a forced reversal of funds by the customer’s bank. Merchants control refunds.
How Long Do I Have to Respond to a Shopify Chargeback?
You’ll see how long you must reply to a chargeback on Shopify’s dashboard. However. You should keep these numbers in mind for reference:
- Discover: 5 days
- Retrieval requests: 20 days
- American Express: 20 days for inquiries and chargebacks
- Mastercard: 45 days
- Second chargeback: 30 days
- Visa: 20 days
Failure to respond within the specified time limit will result in an automatic loss. There. Now you have a tip that’ll help you win.
If you haven’t received a chargeback yet, you should know how long to keep transaction data. Otherwise, your chances of winning will sink if you don’t have the information when the time comes.
Chase Bank recommends keeping purchase data for these providers for the following durations:
- Visa: Minimum 13 months
- Mastercard: Minimum 13 months
- Discover: Minimum 36 months
There isn’t much else to learn here. Let’s move on to how chargebacks work.
How Does the Shopify Chargeback Process Work?
- How Long It Takes: Within 120 days
- Chargeback fee: $15
- Who’s Involved:
- Customer
- Cardholder’s issuer (bank or card network)
- Merchant
- Shopify (Acquirer)
The chargeback process that I’m going to cover is for Shopify Payments. Not other payment methods used through Shopify. However. The process for those payment methods will generally be similar.
First, the customer will get frustrated with their order and complain to their bank (the issuer). From there, the issuer notifies Shopify of the dispute. Shopify will issue the chargeback and inform the merchant.
If you don’t use third-party chargeback alert tools, you’ll know you have a Shopify Payments chargeback in one of 2 days:
- On your dashboard
Here’s what the email will look like:
Your email will actually have styling, though.
You'll navigate to your Orders to find the notification on your dashboard.
From there, you’ll see this:
Not a pretty sight. Once you click on it, you’ll see this:
From there, you’ll decide whether to fight the chargeback. If you accept it, the chargeback is over, and you’ll pay the chargeback fee.
If you fight it, you’ll need to gather evidence and submit it through your Shopify dashboard. From there, Shopify will pass the evidence to the acquirer.
The acquirer will review the evidence and make one of these decisions:
- Merchant wins: Chargeback is reversed.
- Buyer wins: Chargeback stands.
If you win the dispute, Shopify will also refund you the chargeback fee and it won’t contribute to your chargeback ratio. If you lose, the chargeback will contribute to your rate. I’ll talk about this in a bit.
At any point, the customer can withdraw their dispute and end the process. If you can, try to convince them to withdraw. Whether it’s offering a freebie, refund, or whatever.
But wait.
There’s also arbitration. You and the customer may not accept the outcome. Thus, the credit card provider (e.g., Visa) gets involved. They’ll make the final decision.
Here’s How to Win a Shopify Dispute as a Merchant
There’s no silver bullet that’ll result in an easy win for a chargeback, but providing compelling evidence will surely help increase your odds. But first, you’ll need to know whether you should fight a chargeback.
And before you know that, you’ll need to know Shopify’s chargeback rate. Because if you accept a chargeback, that’ll contribute to your rate. But you shouldn’t always fight them.
First, You Should Know Shopify’s Chargeback Threshold
Shopify hasn’t published an “excessive” chargeback rate. Some sources suggest that it’s 1% of monthly chargebacks. But I recommend keeping it under 0.65%.
That percentage is the number of disputes that would result in merchants being placed in the Visa Dispute Monitoring Program. It’s meant to encourage merchants to lower their chargeback rates.
With a 0.65% dispute rate, you’ll have an Early Warning monitoring level. This results in no fines. Reaching or exceeding a 0.9% rate would land you in the Standard tier. This will result in $50-per-dispute fines after being in it for 5 – 9 months.
Why am I saying all of this?
To give you reference.
Shopify’s staff did specify that if you have a high chargeback rate, they’ll remove your account from Shopify Payments. Wouldn’t it be helpful to know a specific percentage, though?
Is It Worth Fighting a Chargeback?
Fighting every chargeback will result in wasting time that you could have spent delegating staff toward other tasks. Also resulting in financial losses.
Accepting every chargeback will result in high chargeback rates and a lot of money paid in fees.
Thus, you’ll need to take a nuanced approach.
Here’s when you’ll want to accept chargebacks:
- Customer has provided clear evidence of fraud.
- Product never arrived.
- Item was returned, but no refund was issued.
- Charge doesn’t match purchase details.
- Customer canceled the order before shipment.
The above scenarios are examples.
Read the situation and know whether it’s worth canceling. Here’s an example. Fight the dispute if your fraud-flagging software shows that the same customer made purchases before.
Though, your chances of winning fraud disputes aren’t that high. I’ll talk about this in a bit.
Here’s when to fight a chargeback:
- Order passed all fraud checks.
- Customer confirmed the order through contact.
- Product was delivered to the billing address.
- Customer has a history of successful purchases.
- Transaction matched the purchase details.
A lot of the time, customers are trying to scam you — through chargeback fraud or friendly fraud. That’s why many folks call chargebacks “online shoplifting. And your chances of winning friendly fraud chargebacks are high. Again, I’ll cover percentages in a moment.
Summary: It’s worth fighting a chargeback if you know you can provide compelling evidence.
What Are the Chances of Winning a Chargeback?
On average, merchants win 30% of chargebacks across all industries [1]. You’ll have around a 43% chance if you're fighting friendly fraud. And if you’re fighting true fraud (AKA third-party fraud), that sinks to 9%.
But wait.
These rates fluctuate by industry and price point. If you’re selling consumer electronics, you’ll have a 16.59% chance of winning. That’s much lower than the almost 36% win rate apparel merchants have.
Here’s a table of win rates at different price points:
Fraudsters target higher-priced items because they offer a higher payout. We also know that fraud chargebacks have a low win rate. If you’re selling high-end merchandise, you’ll need to invest a lot in fraud prevention.
Otherwise, it seems like apparel sellers with clothing that’s less than $29.99 dealing with friendly fraud would have the best chances of winning.
Summary: The chargeback win rate across all industries is 30%.
Gather & Submit Evidence
Shopify will automatically fill in a lot of the details regarding the order. For instance, they’ll fill in the customer’s information, address, etc. You’ll need to go through and fill out everything that they didn’t.
Each section will allow you to upload and submit evidence through files. Shopify will specify the required file types and maximum file sizes. Shopify has much more information regarding the specifics of their file requirements.
Follow this to a “T” to prevent any issues.
Start with your customer interactions.
Upload screenshots that show, for instance, notifications sent to customers proving their subscription will be automatically renewed. Then, you’ll need to explain why you feel that the order was legitimate.
You might have noticed that the order was fraudulent in the screenshots above.
I’d need to ensure my description is concise. And here’s an example:
I am disputing a fraudulent chargeback for Order #1003. The order passed all fraud checks, and the customer confirmed it by phone and email. The order shipped to the billing address and was received. The customer also has a history of successful purchases with us.
This description shouldn’t be long. Otherwise, the issuer may skip information that could have resulted in a won dispute. They likely have to deal with a lot of chargebacks daily. Thus, they don’t have time to blow on your chargeback.
Once that’s done, you’ll need to provide service documentation. This proves that you provided the product or service to the customer. Agreements with the customer’s signature are also great.
The last section requires additional evidence.
I’d usually say that it varies by reason code. But Shopify’s chargeback pages don’t have specific reason codes for their chargebacks. They only list “fraud” or other vague categories.
I will still plug the other guides I wrote on what evidence to submit for different reason codes. They’ll help you understand what to submit for different fraud reason codes. I suggest reviewing them.
These codes will vary by card issuer, though:
Moreover.
If you provide screenshots of your refund, cancellation, or terms of service pages, also give links. In case the issuer wants to review them. The screenshot with a box around the section provides the most relevant information. It also doesn’t overwhelm the issuer.
Providing a link will give them a resource in case they need to review further.
From there, you’ll see 2 buttons on the bottom of the page:
Press Preview response to double-check your information. Once you feel that it’s ready to submit, click Submit response.
Here’s How to Prevent Shopify Disputes
Shopify doesn’t have chargeback codes like other card issuers. Thus, we’ll need to examine their chargeback categories to determine the preventative measures.
1. Fraudulent
What it is: When the cardholder claims the transaction was unauthorized.
How to prevent:
- Use fraud detection tools.
- Confirm large orders with the customer directly.
- Ship to verified billing addresses only.
2. Unrecognized
What it is: When the cardholder does not recognize the charge on their statement.
How to prevent:
- Use a recognizable billing descriptor.
- Send detailed order confirmations via email.
- Provide clear contact information for inquiries.
3. Duplicate
What it is: When the customer is charged multiple times for the same transaction.
How to prevent:
- Check for duplicate transactions before processing.
- Provide clear billing statements and receipts.
4. Subscription Canceled
What it is: When the customer cancels a subscription but is still charged.
How to prevent:
- Confirm cancellations immediately and send a confirmation email.
- Provide clear cancellation procedures.
- Monitor and update subscription statuses promptly.
5. Product Not Received
What it is: When the customer claims they did not receive their product.
How to prevent:
- Use reliable shipping services with tracking.
- Require delivery confirmation.
- Communicate shipping status and delays promptly.
6. Product Unacceptable
What it is: When the customer is unsatisfied with the product quality or it does not match the description.
How to prevent:
- Provide accurate product descriptions and images.
- Use quality packaging to prevent damage.
- Have a clear return policy for dissatisfied customers.
7. Credit Not Processed
What it is: When a customer returns a product but does not receive a refund.
How to prevent:
- Process refunds promptly.
- Send confirmation of refund processing.
- Keep records of all returns and refunds.
8. General
What it is: A chargeback filed for reasons not covered by specific categories.
How to prevent:
- Maintain clear communication with customers.
- Document all transactions thoroughly.
- Resolve issues quickly and effectively to avoid disputes.
Other than what’s above, look into third-party tools on Shopify’s app store. They’ll give you access to more tools to prevent chargebacks. Alerts are an excellent tool for preventing chargebacks because they give you a chance to tackle the issue before it grows into a dispute.
These often require you to integrate your payment processor with multiple providers (e.g., RDR and Ethoca). This can be a pain. However. We simplify the process by doing all the work for you.
Wrapping Up
There’s no secret to winning chargebacks. Sorry. The best you can do is submit compelling evidence within time limits. Otherwise, your fate is in the hands of the customer’s banks.
The best you can do is focus on preventing chargebacks. One way to do that is by using chargeback alerts. We offer these alerts and make it easy for merchants to receive them. Learn how we’ve reduced chargeback rates for some sellers by up to 91%.
Sources
- [1] Midigator. Chargeback statistics