Chargebacks & Disputes
Payment reversals and merchant protection strategies
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0 / 5 completed⚠️ The $28 Billion Problem
A chargeback is a forced payment reversal initiated by a cardholder's bank. Unlike refunds (merchant-initiated), chargebacks bypass the merchant entirely. Originally created in 1974 to protect consumers from credit card fraud, they now cost merchants $28 billion annually. Each chargeback incurs a $15-25 fee plus lost merchandise. Exceed 1% chargeback rate and card networks flag your account—hit 1.5% and you lose processing privileges entirely. Yet 86% of chargebacks are "friendly fraud"—legitimate purchases disputed by customers who forgot, regretted, or want free items.
🎯 The Chargeback Dilemma
Chargebacks favor consumers heavily—cardholders have 120+ days to dispute, while merchants get 7-10 days to respond. The burden of proof lies with merchants: you must prove the transaction was legitimate, the customer authorized it, you delivered the product, and they received it. Even with evidence, merchants only win 40-50% of disputes. Worse, "friendly fraud" is legal—customers can claim "I don't recognize this charge" without proof. For many businesses, especially digital goods and subscription services, chargebacks are unavoidable operational costs.
Annual Cost
Total chargeback costs globally (2024)
Friendly Fraud
Chargebacks from legitimate purchases
Fee Per Case
Plus lost merchandise and revenue
Warning Threshold
Card networks flag high-risk merchants
📊 Chargeback vs Refund
✓ Refund (Merchant-Initiated)
✗ Chargeback (Bank-Initiated)
⚖️ Consumer Rights
The Fair Credit Billing Act (FCBA) gives cardholders powerful protection. You can dispute charges for: