How to Win a Chargeback as a Business in 2024

Having dealt with chargebacks with my e-commerce business has taught me a lot about how to win them. And I want to share that knowledge in this guide.

I’ll explain what businesses need to do throughout different steps of the chargeback process and how to improve their chances of winning. From there, I’ll talk about the overall odds of winning a chargeback and how to improve those odds.

Let’s win a chargeback.

Key Takeaways

• Understand the reason code to identify the dispute.
• Resolve disputes proactively to avoid chargebacks.
• Gather evidence to support your defense against the claim.
• Submit a clear rebuttal letter with relevant documents within deadlines.
• Consider hiring a chargeback analyst for high-volume or complex cases.

How to Win a Chargeback as a Business

Here’s what you need to know to win chargebacks:

• Check the Reason Code: Knowing the reason for the dispute helps tailor your defense.
• Resolve the Dispute Before it Escalates: Early resolution avoids chargebacks and saves fees.
• Gather Evidence: Strong evidence strengthens your case and increases win rates.
• Check Deadlines: Meeting deadlines is crucial to avoid automatic chargeback losses.
• Write a Rebuttal Letter: A clear and persuasive letter effectively argues your case.
• Hire Someone to Win Your Chargeback: Analysts offer expertise for complex cases or high volumes.

I’ll expand upon each of these points (and provide examples) throughout the following sections.

Let’s begin with checking the chargeback reason code.

1. Check the Reason Code

Start by identifying the chargeback reason code issued by the customer's bank. A reason code is a numerical code that explains the customer's dispute reason. Each card network (Visa, Mastercard, etc.) uses different codes for specific situations.

The reason code is your guide for building your defense.

Consider an example like Visa's reason code 83: "Fraud-Card Absent Environment". This indicates the customer claims someone made an unauthorized purchase on their card.

In the case of fraud, you’d need to evaluate the transaction value and fees to decide if contesting it makes financial sense. You’d have a more difficult time providing evidence that could counteract the customer’s claims.

Thus, knowing this reason code saved you from wasting time and resources on fighting this specific chargeback.

Understanding the reason code helps you gather the right evidence.

Summary: The chargeback reason code reveals the customer's dispute, allowing you to strategically tailor your response with the most relevant evidence.

2. Resolve Disputes Before They Transition to Chargebacks

Reach out to the customer before they escalate the dispute to a chargeback and deal with their concerns. If possible, consider partial refunds or exchanges to reach agreeable solutions.

If that doesn’t work, consider offering full refunds.

You may find yourself tempted to immediately fight a dispute. Don’t. It’s mostly bigger businesses (e.g., Amazon) that’ll fight chargebacks due to their thorough evidence-collecting systems, fraud prevention, and access to chargeback insurance.

Resolving issues directly with the customer is great for several reasons:

• Cost-Effective: You avoid chargeback fees incurred by your payment processor.
• Builds Goodwill: Positive customer experience can lead to repeat business and positive reviews.
• Less Disruption: Handling disputes prevents the time-consuming hassle of the chargeback process.

Yes, dealing with a dispute prior to a chargeback could result in a refund. However, you avoid having a higher chargeback rate. A rate that will affect whether payment processors and card networks continue allowing you to use them.

Avoiding chargebacks also eliminates chargeback fees, which could cost more than the transaction itself.

Summary: Proactive dispute resolution through clear communication, prompt responses, and customer-friendly policies can save you the cost and headache of chargebacks.

3. Gather Evidence

To win a chargeback, build a strong representment package. This includes:

• Rebuttal Letter: A clear, concise letter outlining your defense against the chargeback (more details later in this guide).
• Reversal Request Form: Provided by your payment processor and includes key transaction details.
• Chargeback Debit Advice Letter: From your payment processor, outlining the chargeback details.
• Supporting Evidence: This varies by situation (e.g., receipts, AVV and CVV match data, communication records, and delivery confirmation).

Different scenarios and industries will require specific evidence. For example, a service-based business might prioritize contracts or proof of service rendered.

Once you've assembled your package, submit it to your acquiring bank before the deadline. Your payment processor will guide you on their preferred submission method (often online or by fax).

Summary: Your representment package includes a rebuttal letter, reversal request form, Chargeback Debit Advice Letter, and tailored evidence; submit this to your acquiring bank within the specified deadline.

1. Evidence for E-Commerce Products

Your goal in this area is to prove the customer received the goods and is using them.

Here are examples of what you could use:

• Shipping Proof: Tracking numbers, delivery confirmation (physical signature if available), shipping labels.
• Photos: Images of the product as it was packaged, and potentially photos of any damage reported by the customer.
• Return Policy: Proof of your return/refund policy, clearly displayed on your website and receipts.
• Security Measures: Fraud detection tools you use, IP address or device information related to the order.
• Social Media Screenshots: Photos or videos of the customer using the product in question.

The specific evidence required will depend on the reason for the chargeback. And you’ll need to consider what evidence the customer will provide. For instance, if you’ve made exaggerated claims on social media about your product, they could use that post against you.

2. Evidence for Physical Goods

Here’s what you’ll need in general:

• Product Description: A screenshot or copy from your website, catalog, or promotional materials detailing the item's features and specifications.
• Return Policy: A clear and easily accessible copy of your return policy, including timelines and conditions.
• In-store Pickup: A pickup form signed by the customer, along with a copy of their ID for verification.
• Proof of Possession: Photos or emails provided by the customer demonstrating they have the item in their possession.
• Security Camera Footage: Time-stamped footage of in-store pickup or proof of shipment preparation (if applicable).
• Witness Statements: Signed statements from employees who prepared the order or interacted with the customer.
• Fraud Detection Data: Any data you captured through fraud detection tools (IP address, device fingerprint, unusual order patterns).

The strength of your case depends on the specific chargeback reason. Tailor your evidence accordingly. For instance, demonstrating product authenticity or addressing "item not described" claims may require additional supporting documentation.

3. Evidence for Hospitality, Entertainment, & Travel Businesses

Here’s what you’ll need in the travel, entertainment, and hospitality industries:

• Booking Details: Reservation confirmations, itineraries, digital or physical tickets, highlighting dates, times, and services included.
• Voice Authorization: Audio recordings of phone reservations, with timestamps and agent notes (if applicable).
• Terms of Service: A clear copy of the terms and conditions agreed upon at purchase, including cancellation policies, non-refundability clauses, and any specific restrictions.
• Customer Identification: A copy of the customer's photo ID if provided during purchase or check-in.
• Unused Services: Proof that they didn’t use purchased services, such as unopened tickets, unclaimed hotel rooms, or unused activity passes.
• No-Show Documentation: Records of no-shows for booked accommodations, transportation, or events.

The nature of hospitality, entertainment, and travel services often requires gathering additional details at the booking stage.

4. Evidence for Subscriptions & Digital Products

And here’s evidence for digital products and subscriptions:

• Purchase Records: Order confirmations, invoices, and any internal records detailing the transaction date and subscription terms.
• Terms of Service: A clear copy of the terms and conditions agreed upon at the time of signup including cancellation policies, auto-renewal clauses, and free trial information.
• IP Address Logs: IP addresses associated with logins and content access, ideally showing a match with the cardholder's billing address or their usual location.
• Timestamped Activity Logs: Detailed records of account usage—login times, downloads, content viewed, subscription plan activity, etc.
• Device Fingerprinting: Device identification data (where permissible) to help associate usage with the cardholder's device.
• Customer-Submitted Proof: If requested, the customer may need to provide screenshots or other proof demonstrating they couldn't access the content.

For subscriptions and digital products, the focus is on demonstrating the initial purchase authorization AND the fact that the customer had access to or actively used the service. This combats claims of "non-receipt" or services "not rendered."

4. Check Deadlines

The chargeback process has strict deadlines set by issuing and acquiring banks. These deadlines can vary. Check with your payment processor for specifics.

Ignoring deadlines will likely result in an automatic loss of the chargeback.

To maximize your chances of success, respond to the chargeback notification immediately.

Summary: Time is crucial in the chargeback process; inquire about deadlines with your payment processor and act promptly to avoid default losses.

5. Write a Compelling Rebuttal Letter

Your rebuttal letter outlines your case and why the chargeback is invalid.

Here's how to make a strong, persuasive letter:

• Concise and Clear: Use direct language and short paragraphs to explain your position.
• Organized: Use headings or bullet points to make information easy to scan.
• Evidence-Focused: Highlight your most compelling evidence and refer directly to the supporting documentation.
• Bank's Rules: Make sure your letter format and content align with the issuing bank's requirements.

Summary: Your rebuttal letter is your first, formal chance to refute the chargeback; write it clearly, concisely, focus on evidence, and adhere to the bank's specifications.

6. Hire Someone to Win a Chargeback for You

Would you rather hire a third party to deal with chargebacks? That’s when chargeback analysts enter the arena.

Chargeback analysts are specialists who handle chargeback disputes on behalf of businesses. They analyze chargeback data, gather evidence, communicate with banks, and submit chargeback representment packages.

Here are the pros and cons of hiring a chargeback analyst:

Pros

• Expertise: They have in-depth knowledge of chargeback rules and regulations across different card networks.
• Saves Time: They handle the time-consuming chargeback process, freeing you to focus on your core business.
• Increased Success Rate: Analysts have experience crafting compelling responses that increase your chance of winning.

Cons

• Cost: Chargeback analysts charge fees, either hourly or per chargeback.
• No Guarantee: They can't promise victory in every case, especially against valid customer claims.

Chargeback analysts are valuable for businesses of all sizes, but especially for those facing a high volume of chargebacks.

What if you don’t have a high volume of chargebacks? Then consider whether your team doesn't have the time or knowledge to manage chargebacks effectively, an analyst can fill that gap.

Or if you’re dealing with intricate chargebacks involving fraud or technical errors, an analyst's experience can improve your chances of winning.

This last reason’s the most important.

Many card networks have limits on the number of chargebacks a business can sustain before facing penalties. If you have a high chargeback rate (e.g., more than 0.4%), an analyst can help you fight invalid claims and avoid exceeding these thresholds.

Summary: Chargeback analysts offer expertise and time-saving benefits but involve added costs and don't guarantee success; carefully weigh the pros and cons before hiring one.

Chargeback Win Rates (for Businesses)

77% of merchants win 30% of chargebacks on average [1]. This win rate will vary by industry and transaction values. For the apparel industry, win rates shoot up to 35.81% due to it being easier for businesses to provide evidence [2].

Consumer electronics have a much lower win rate at 16.59% due to their often higher value. Thus, higher potential for fraud.

Lower-valued transactions often have a much higher win rate of more than 46% compared to higher-valued transactions ($300+), which have around a 27% win rate. I couldn’t find specific information as to why.

But I suspect that’s because fraud more likely occurs with higher-priced transactions due to higher payouts.

How to Improve Your Chances of Winning a Chargeback (as a Merchant)

Here’s everything you’ll want to do to improve your chances of winning a chargeback as a seller:

1. Maintain Clear Records of Everything: Keep sales receipts, customer communications, shipping confirmations, and photos of items being shipped.

Use a CRM system for customer interactions and integrate your sales platform with your shipping provider. Have multiple areas on-site and off-site (e.g., in the cloud) to store your data. Having them stored in 2 locations prevents data loss in case a catastrophe occurs.

2. Use Clear Business Descriptors. These show up on your customer's credit card statement. Use a descriptor that's instantly recognizable to avoid confusion.

Let’s say your company’s name is “Franks Fishing Nets” and Paddle is the provider you use to manage payments. Instead of “PADDLE.NET FNN,” which is confusing and vague, opt for “PADDLE.NET Franks Fishing Nets.

The number of characters usable for descriptors depends on the payment provider. However, including your name eliminates any potential confusion. And it prevents the customer from claiming a chargeback from an unknown transaction.

3. Fight "Friendly Fraud" With Proof: If the customer claims an item wasn't received, have tracking numbers, delivery confirmations, and security camera footage ready.

4. Have a Clear Return/Refund Policy: Outline timeframes for returns, conditions for acceptance, any fees, and how to start a return. Place this policy prominently on your website, in order confirmations, and on receipts.

Dealing with a refund costs you a lot less money versus a chargeback. With a chargeback, you have all the losses a refund incurs (payment processing fee, marketing, etc) plus the chargeback fee—$20–$100 per chargeback.

We offer a tool that’ll help prevent refunds from escalating into chargebacks. Check it out.

5. Avoid Misleading Social Media Claims: Customers may use exaggerated or false social media posts against you in a dispute. Practice caution when making wild claims over social media.

6. Respond to Chargebacks Quickly: Issuing banks have strict deadlines for fighting chargebacks. Check with your payment processor for specifics.

7. Work with Your Payment Processor: They often have tools and expertise to help you successfully fight chargebacks.

8. Don’t Rely on Automation: Automated systems can potentially make mistakes, which could result in scrambled evidence. Dedicate a staff member to fight chargebacks. If you insist on automation, have a team member review the evidence once the machine is done.

These tips aren’t guaranteed to help you win. But they’ll help improve your odds of winning.

Summary: To win chargebacks, businesses need detailed transaction records, clear billing practices, proof of delivery, accessible return policies, and more.

What Else You Should Know to Win Chargebacks

The above points say almost everything you’d need to know. But here are some minor tips that’ll help you with chargebacks:

• Your Response Must Be Accessible: Ensure everything you provide is easy to read.
• Not All Chargebacks Are Valid: Banks may reject some chargebacks customers initiate.
• You’ll Always Incur a Chargeback Fee: No matter whether you win or lose.

I’ll provide more details on each point throughout the following sections.

Let’s begin with making your response accessible.

1. Your Response Must Be Accessible

Make your evidence clear and easy for the bank to review. Otherwise, they may skip critical evidence you provided that could have otherwise improved your chances of winning. Also ensure you follow your acquirer’s submission preferences

Consider these key points when gathering your evidence:

• File Format: Use the file type specified by the issuing bank (often PDF).
• Submission Method: Follow their instructions for submitting evidence, whether it's online, email, or fax.
• Rebuttal Letter Format: Use bullet points and short paragraphs for scannability.
• Highlight Key Evidence: Bold or underline crucial information within the documents you provide.

Summary: Your response format impacts how the bank reviews your evidence. Present it clearly and concisely to strengthen your case for a chargeback reversal.

2. Not All Chargebacks Are Valid

Here are some situations where banks are likely to decline a chargeback:

1. Friendly Fraud: The customer claims they never received the item, but you have proof of delivery (tracking number, signature confirmation). Friendly fraud can also involve claiming a damaged or different item was received, where your return policy outlines the correct procedure.

2. Buyer's Remorse: The customer regrets the purchase and wants their money back, but hasn't followed your return policy timelines or conditions.

3. Technical Errors: These occasional glitches can cause banks to mistakenly initiate a chargeback. Respond promptly and provide evidence of the valid transaction.

4. Repeat Offenders: Banks might blacklist customers who abuse the chargeback system. Making it difficult to file future claims.

Summary: Recognizing invalid chargebacks—friendly fraud, buyer's remorse, unclear descriptors, and technical errors—allows you to target your defense and potentially save on fees.

3. You Will Always Incur a Chargeback Fee

Win or lose a chargeback, you'll always face a chargeback fee.

This fee can range from $20 to $100 and isn’t reversible. If you push to arbitration, the fees increase to the hundreds (if not, low thousands). Arbitration is a process where a neutral third party reviews the case and makes a binding decision.

Summary: Regardless of a chargeback's outcome, businesses will incur fees.

How to Win a Chargeback as a Business Without Evidence

It's tough to win a chargeback without evidence, but it's not impossible. If a customer has evidence and you don’t, the cards are stacked against you and the issuing bank will almost 100% side with the customer. At that point, you might as well not attempt to fight the chargeback.

Because the win rates for businesses are already low (around 30%). And those businesses likely have evidence.

However, you may have searched for this question. And I will provide an answer.

Here's what you can try:

• Understand the Reason Code: Contact the cardholder's issuing bank to find this out.
• Contact the Customer Directly. The chargeback might be a misunderstanding you can resolve quickly.
• Negotiate With the Customer: See if you can reach a compromise to avoid the chargeback altogether.
• Present a Strong Appeal: Even without hard evidence, explain your side of the story clearly and professionally.

Summary: Winning a chargeback without evidence is almost impossible. Focus on understanding the reason, communicating with the customer, and presenting a clear, professional appeal to the issuing bank.

Chargeback Reversals: You Should Know About Them

A chargeback reversal is a victory for you. It happens when a customer disputes a charge with their bank (initiating a chargeback), but after you present evidence proving the transaction was legitimate. The issuing bank reverses the chargeback.

The bank then returns the disputed funds to your account. However, that may not be the end of the chargeback.

A customer may decide to initiate a second chargeback (also called pre-arbitration) if they disagree with the reversal. So long as they find new evidence that could support their case.

And if the customer loses the first and second chargebacks, you won’t have to worry about a third. In most cases. In very rare scenarios, if a customer digs up compelling enough evidence after the first 2 chargebacks, the banks may consider their attempt at a third.

Summary: A chargeback reversal means the business successfully contested the chargeback and won the dispute.

FAQs for Winning Chargebacks as a Merchant

Read on to find frequently asked questions about winning chargebacks as a business.

How Many Chargebacks Can a Business Have?

The amount of chargebacks a business can have will vary by card network and payment processor. For instance, if fewer than 1% of your transactions are chargebacks, you’ll remain on the good side of most card providers.

What Happens If You Lose a Chargeback?

If you lose a chargeback, the disputed funds are permanently deducted from your account. You'll also likely incur additional fees from your payment processor.

Conclusion

While chargebacks can be frustrating, businesses can improve their win rates. Detailed records, clear policies, and proactive customer service are essential for successful chargeback defense.

Wouldn’t you find it more ideal to prevent chargebacks from happening? We have a tool to help. Learn more now.