Chargeback Risk Factors

Every chargeback tells a story, and it’s important to learn the specific circumstances behind the disputes that you deal with. It’s also the case that many chargebacks start out from strikingly similar origins. Many merchants engage in practices that are known to be common chargeback risk factors, and they can make significant progress toward reducing their chargebacks simply by acknowledging and addressing these vulnerabilities.

Some risk factors are easy to fix and others may be intrinsic to the merchant’s core operations, but knowing what they are is crucial. What are the major risk factors for chargebacks, and what can merchants do to mitigate them?

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The way to fight and prevent chargebacks effectively is to know where they’re coming from. When you’re dealing with a high volume of chargebacks—or an unexpected spike in your chargeback rate—it may be the case that one of these common risk factors has come into play, leading to a surge in chargebacks based on similar claims.

Analyzing your chargeback data after the fact can confirm this, but by reviewing these risk factors beforehand to see if they already apply to your business, you can take proactive steps to get things under control.

Let’s take a look at the twelve biggest chargeback risk factors for merchants.

Customer Service Issues

Cardholders frequently turn to their banks for a chargeback when they can’t get a timely and helpful response from the merchant’s customer service team. If you’re hard to reach or slow to respond, you’re likely missing out on opportunities to prevent avoidable chargebacks.

The remedy: Provide excellent, attentive, 24/7 customer service coverage. Work constructively to find solutions to customers’ problems and never stonewall them.

Unclear Merchant Descriptors

When the merchant descriptor that appears on cardholder billing statements doesn’t match the store name that the cardholder would recognize, they may get confused and assume the charge is fraudulent, leading to a friendly fraud chargeback.

The remedy: Make sure your merchant descriptor is easy to recognize and contains contact information like a phone number or URL.

Unclear or Poorly-Worded Policies

Vague or overly restrictive return and refund policies frequently often lead to customers getting frustrated and disputing charges, but poor language or policies in your terms of service, sales contracts, and other customer agreements can cause disputes as well.

The remedy: Be transparent and avoid using unclear language or downplaying disclaimers or policies that your customers might not like. Offer a generous and flexible refund policy—refunds are always cheaper than chargebacks.

Insufficient Product Information

“Product not as described” is a valid chargeback reason, and merchants have only themselves to blame for these disputes when their marketing information and product pages are misleading, overpromise, or fail to include necessary details or photos.

The remedy: Provide complete and detailed product descriptions with lots of high quality photos, and never exaggerate or mislead your customers as to what you can deliver.

Delivery Issues

When shipping and delivery problems cause delayed or missing packages, cardholders will often dispute the transaction. Unconfirmed deliveries can also provide cover for refund scams and friendly fraud chargebacks.

Manage Chargeback In-House Or OutshoreThe remedy: Track all deliveries and provide cardholders with tracking numbers and updated delivery estimates. Requiring signature confirmation can give you concrete evidence to submit in response to fraudulent delivery-related chargebacks.

Insufficient Customer Authentication

If all it takes to access stored payment credentials are a username and simple password, it’s not hard for fraudsters to hack or phish their way inside, take over the account, and make fraudulent transactions.

The remedy: Verify customer identities with strong passwords and two-factor authentication methods when possible.

At a minimum, require CVV and AVS matching on all transactions.

Poor Recordkeeping

Many merchants endure chargebacks that they could have fought and beaten if they’d only had the right evidence to submit with their representation of the charge. If your transaction records and other relevant documents aren’t retained, organized, and readable, they won’t be of much help to you.

The remedy: Maintain complete and legible copies of your receipts, delivery tracking, customer communications, and related documents.

Digital Goods Chargebacks

The ephemeral nature of digital or virtual goods means that merchants who sell these goods often deal with difficult-to-disprove dispute claims about whether or not they were delivered or usable.

The remedy: Requiring customers to validate or register digital goods can provide proof that they were received should a dispute ever arise.

Inadequate Anti-Fraud Tools

Online fraud is continually becoming more sophisticated, and merchants have to keep pace with fraudsters to protect themselves. Using outdated anti-fraud tools—or none at all—leaves merchants open to attacks that might otherwise be detected and prevented.

The remedy: Analyze your fraud data to learn where your fraudulent transactions are coming from, and choose the best current anti-fraud solutions to fit your situation.

Outdated Software

Anti-fraud tools aren’t the only programs that can expose you to chargebacks. Your web hosting platform, checkout software, proprietary apps, and other programs are all potential points of vulnerability if they haven’t been reviewed, updated, and patched on a regular basis.

The remedy: Run a software audit and update or replace your software solutions as necessary.

Inadequate Staffing or Training

Poor staff training can lead to slipshod customer service, transaction errors, and other problems that may lead to chargebacks. Merchants may also find themselves overwhelmed with chargebacks when they don’t assign enough staff or resources to deal with them.

The remedy: Train your staff well on your policies and procedures, especially with respect to transaction processes. If you don’t have enough time or staff to dedicate to chargeback management, consider enlisting outside help.

Ignoring Fraud and Chargeback Trends

The landscape of fraud and chargebacks is always changing. Card networks frequently update their regulations, fraudsters are constantly inventing new schemes, and shifting ecommerce trends can have a huge influence on consumer expectations and behavior. If you’re not following along, it’s easy for disputes and fraud to sneak up on you.

The remedy: Educate yourself about what’s going on in the payments world and pay close attention to developments that might affect your business.


Some chargebacks may be inevitable, and no merchant can perfectly shield themselves from every potential dispute. However, knowing the common risk factors—and honestly assessing how many of them may be impacting your chargeback rate—can go a long way toward informing an effective and manageable chargeback prevention strategy.

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