What Is a Chargeback Alert? A Beginners Guide

I always try to keep my dispute rates low. I've found that chargeback alerts are great for this.

I’ll explain what these are, how they work, their cost, whether they’re effective, and your options.

Let’s begin with what they are.

Key Takeaways

• Alerts tell sellers when a customer complains to their bank about an order.
• You can refund the buyer and stop a chargeback with this alert.
• Alerts could cut chargeback rates by up to 91%.
• Ethoca and Verifi are the only alert providers.
• Expect to pay up to $35-40 per alert.
• Get alerts through certified resellers or directly from Verifi and/or Ethoca.

What Is a Chargeback Alert?

A chargeback alert tells sellers about customer payment disputes. It shows possible issues like theft or product problems. Quick action on alerts helps protect seller money and reputation.

I’d be repeating information I wrote elsewhere if I typed anything else.

Let’s see how these work.

Summary: They let merchants know when there’s a potential order dispute.

How Do Chargeback Alerts Work?

Chargeback alerts tell businesses about customer disputes. They give time to refund or challenge the dispute. Quick action can stop chargebacks, avoiding fees and fines.

The actual process varies by alert provider.

With Rapid Dispute Resolution (RDR), it works like this:

1. A customer tells their bank about a purchase concern.
2. The bank sends the complaint to Visa Resolve Online (VROL).
3. RDR checks if a refund is needed against pre-established criteria.
   1. The case pauses for 72 hours.
4. If the complaint fits the rules, the acquirer gives a refund.
5. The case ends.

CDRN and Ethoca Alerts tell the seller about the case. They pause it for 72 hours. This gives the seller time to refund or gather proof.

Some alert providers (like Chargeback) auto-refund for certain amounts. This saves you time from checking each case.

That sounds good. Let's see how much they cost.

Summary: Alerts tell you when there's an order issue. You then choose to refund or fight a dispute.

How Much Do Chargeback Alerts Cost?

Chargeback alerts usually cost $35 to $50 each. Prices change based on provider and transaction volume. Some offer monthly plans; others charge per alert. The cost helps stop chargebacks.

These costs also change by enrollment.

CDRN and Ethoca often charge the same prices.

Rapid Dispute Resolution charges per alert. The price varies by merchant category code (MCC).

Merchants with riskier codes pay rates close to Ethoca's and CDRN's. Lower-risk MCCs pay less.

Here are examples of MCC code tiers and the costs:

Verifi and Ethoca don't share their rates per alert. All pricing I've seen comes from resellers.

I've heard they don't offer volume pricing. Many alert solutions (like us) do.

You'll save more money when getting more alerts. This is great for high-volume businesses.

Why pay for alerts when you could just eat the chargeback fees?

These fees range from $10 to $100 per dispute.

Let’s say you exceed a card network’s chargeback rate threshold.

You might end up in the Visa Dispute Monitoring Program. Here, you pay $50 more per chargeback plus review fees up to $25,000.

And if your rates don’t improve after 12 months, you lose access to Visa.

If you're worried about spending too much on chargeback alerts, I'll explain who should consider them later.

Now, let's see how well they work in cutting down chargebacks.

Summary: They cost (on average) $35 – $50 per alert. Some solutions offer volume pricing. Others charge monthly.

Are Chargeback Alerts Effective at Preventing Chargebacks?

Chargeback alerts can cut chargeback rates by up to 91%. Their success varies by industry and how you manage them. When used with other dispute methods, alerts can save you lots of money.

How well they work depends on:

• Where the customer's bank is: Alerts work better for US consumers.
• How long you've been in business: Older businesses have better coverage.
• How many orders you have: More sales mean better coverage.
• Coverage: Whether a customer's bank uses an alert service.
• What you sell: Alerts work better for SaaS and digital goods.

Let’s see how each provider does.

Rapid Dispute Resolution can lower Visa chargeback rates by 50 to 70%.

Ethoca Alerts can stop up to 40% of chargebacks.

Some say they can prevent 30% of disputes for digital goods. And 17% for physical goods.

The numbers I found don't say which card network's disputes were reduced.

CDRN alerts can cut chargeback rates for digital goods by up to 40%. And 21% for tangible goods.

Again, the source doesn't say which card brand these stats are for.

Note that these numbers are averages. Every seller will have different results.

You can probably guess what alert providers are available by now.

But we should introduce each to help us determine which are the best to use.

Summary: Chargeback alerts could reduce chargeback rates by up to 91%. Its effectiveness relies on many factors.

What Alerts Are Available?

Alerts come from 2 providers:

• Verifi (a Visa company) has CDRN and RDR.
• Ethoca (a Mastercard company) has Ethoca Alerts.

Many don't call RDR a chargeback alert. They say it's a system that works like an alert.

But I'll include it because it's almost the same as others.

I’ll use this piece to give you an introduction to each.

Let’s start with RDR.

1. RDR

Verifi Rapid Dispute Resolution (RDR) solves disputes before they become chargebacks. It gives refunds when needed. This stops chargebacks by fixing issues early.

I give more tidbits about RDR in another piece. Check it out.

Sellers can use RDR for customers worldwide.

97% of US banks and 83% of global ones use RDR. You'll likely meet a bank that supports it.

However:

RDR only works on orders that use Visa cards.

This next alert provider offers more coverage.

Summary: Acquirers refund customers for merchants if a pre-dispute matches the rules a seller sets.

2. Consumer Dispute Resolution Network (CDRN)

Verifi CDRN alerts tell sellers about possible chargebacks. It lets sellers fix issues before they become chargebacks. Sellers must give refunds manually.

CDRN alerts only work for US customers.

They cover more card networks:

• Visa: 50%
• Mastercard: 5%
• Other card networks (e.g., Discover): Around 30%

I couldn't find how many US banks use CDRN.

Let’s move onto the final provider.

Summary: Offers chargeback alerts for most card networks.

3. Ethoca Alerts

Ethoca Alerts tell sellers when there might be a dispute. Sellers then choose what to do. They can refund the customer or get ready for a chargeback.

These alerts work globally.

They cover 95% of Mastercard orders and 50% of other networks' (including Visa).

Almost all issuers will participate in Ethoca.

If you go to Ethoca’s site, you’ll see “fraud disputes” mentioned a lot.

Do they only focus on disputes regarding stolen cards?

No.

They will also focus on other chargeback types, like merchant error.

If you're not sure which alert to use, I have a guide comparing RDR, CDRN, and Ethoca.

Or you can get a sneak peek of what’s in that piece in a couple of sections.

First, let’s cover the pros and cons of alerts.

Summary: They focus on Mastercard transactions but function like CDRN alerts.

Pros & Cons of Chargeback Alerts

Pros:

• Find issues in a day instead of weeks.
• Quickly fix customer problems.
• Can stop up to 91% of chargebacks.
• Prevents most chargeback types.
• Save shipping costs by stopping orders early.
• Get setup within 12 hours.
• Less time wasted on disputes.

Cons:

• Doesn't stop friendly fraud.
• Can stop you from fighting friendly fraud if you auto-refund.
• Not for everyone: Many sellers may not need it.

Let’s expand on that last con.

When Do I Need Chargeback Alerts?

Here are folks and scenarios that I recommend alerts for:

• Lower average sale values: Refunding high-ticket items leads to more losses.
• High-risk sellers: They should use all tools to lower dispute rates.
• You're in a dispute program: It's key to exit this program fast.
• Those without chargeback staff: Can lower work for teams without dispute experts.
• High chargeback rates: If your rate is near 1%.
• Frequent chargeback losers: If you win less than 50% of disputes.

What alert provider should you use?

Use all 3 if your chargeback rate is near 1% and you have US customers.

If your buyers are outside the US, use RDR and Ethoca.

RDR and Ethoca are best overall. But focus on which cards cause most chargebacks.

If Mastercard, choose Ethoca.

If Visa, pick RDR.

If neither, consider only Ethoca if many chargebacks come from outside the US.

CDRN might work better for those with mainly US disputes.

Why not use Ethoca and CDRN?

Using both can cause double charges and fees. If you used a reseller like Chargeback, we'd pay you back for double charges.

You might have picked your alert provider by now. How do you maximize your usage?

Summary: High-risk sellers who have low average transaction values get the most benefit from alerts.

How Do I Optimize Chargeback Alerts for My Business?

The best way to improve chargeback alerts is to use a certified reseller. This puts all your data in one place.

It also stops you from calling Ethoca and Verifi's customer service.

Chargeback, for example, will handle CDRN and Ethoca refunds for you. This stops you from missing refund windows (about 72 hours).

If you miss these windows, the case would become a chargeback.

I digress:

We'll then tell you right away when a refund happens.

This lets you quickly stop future billing and shipping. Your customer can't get the refund and product.

Using a reseller gives you access to Ethoca and Verifi alert data.

I’ll discuss this point in a second.

2. If you have staff for chargebacks, they could sign up for Verifi and Ethoca.

Having these platforms gives you Order Insights (Verifi) and Consumer Clarity (Mastercard).

Both tools let you give customers more details about their purchases. This can stop cases before they become alerts.

3. Look at your data.

Use prevention alerts to track disputes to their source.

For instance, you could see if more chargebacks come from a specific marketing campaign or currency.

This data can help you fix weak points in your business. This might reduce future alerts and save you money.

4. Update your CRM and OMS.

After getting an alert, do these things for your order system (OMS) or customer manager (CRM):

• Stop active services: End any ongoing services tied to the sale.
• Cancel future plans: If it was a subscription, stop future charges.
• Note the debited amount: Record the amount taken from your account.
• Update your blacklist: Add the disputed sale to your fraud list.
• Restrict access: Stop the user from using any digital products.
• Hold shipments: If the item hasn't shipped, don't send it.

Reconciliation is critical to keep your books straight and to prevent further damage from the shopper.

You should also use chargeback alerts with other prevention methods. We cover these in a separate piece.

Otherwise, we’ll finish up with some “Q” and “A.”

FAQs

What Is a Chargeback Alert on Amazon?

An Amazon chargeback alert tells sellers when a customer questions a charge. This gives sellers time to fix the issue before it becomes a chargeback.

What Is a PayPal Chargeback Alert?

A PayPal chargeback alert tells sellers when a buyer disputes a payment. It shows the buyer has asked their bank for money back.

What Is a Chargeback Notice?

A chargeback notice is a message from a bank or payment company. It tells a business that a customer has questioned a sale. The notice asks the business for details to look into the claim.

Is a Chargeback Serious?

A chargeback is serious because it can cost businesses money. Many disputes can harm a business’s reputation, increase fees, and lead to the loss of seller accounts.

Wrapping Up

Chargeback alerts give merchants a chance to deal with pre-disputes before they escalate to chargebacks. Whether it’s through a refund or to fight the dispute.

Going directly with Verifi or Ethoca can take a long time and cost you more per alert.

Go with a certified alerts reseller like Chargeback. Try us and see how we can help reduce your chargeback rates.

Sources

• [1] Verifi CDRN alerts. Chargebackhit. 12/7/2023.