Legal, Compliance & Privacy

Chargeback

A forced transaction reversal initiated by a cardholder through their bank.

1 min readLast updated Apr 2026

A forced transaction reversal initiated by a cardholder through their bank.

Why It Matters

Chargebacks cost you the sale plus $15-100 in fees. Too many chargebacks (1%+ of transactions) can result in higher processing fees or account termination.

Practical Example

Scenario

A supplements brand experiences 1.2% chargeback rate.

Calculation

500 orders/month × 1.2% = 6 chargebacks × $75 fee = $450 in fees + lost merchandise. Threshold warning from processor

Result

Implemented 3D Secure and better shipping notifications, dropped to 0.4% rate, saved $300/month in fees and protected merchant account

Pro Tips

  • 1Use clear billing descriptors—customers shouldn't wonder 'what is this charge?'
  • 2Send shipping confirmations with tracking; most 'item not received' disputes are preventable
  • 3Respond to chargeback notifications quickly with compelling evidence (signed delivery, email correspondence)

Common Mistakes to Avoid

Ignoring chargeback notifications—failure to respond is an automatic loss
Using generic or unclear billing descriptors that confuse customers
Not keeping records of delivery confirmation and customer communication

Frequently Asked Questions

Related Terms

PCI DSS

Payment Card Industry Data Security Standard - security standards for handling credit card data.

Fraud Prevention

Systems and practices to detect and prevent fraudulent transactions.