Chargeback Prevention

Eliminating Merchant Error Chargebacks

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Not to get too philosophical, but sometimes we can be our own worst enemies. If you’re trying to manage a high chargeback rate and neither your anti-fraud measures nor chargeback representments seem to be making a dent in it, it may be that the chargebacks are coming from inside the house.

Merchant error chargebacks are extremely common, but the good news is that you can prevent them by identifying their causes and making the necessary changes to your operations. What are some of the most frequently encountered merchant error chargebacks, and what can merchants do to prevent them from happening?

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Chargebacks are often lumped into three broad categories—true fraud, friendly fraud, and merchant error. True fraud chargebacks are the classic cases of fraudsters using stolen credit card numbers to make unauthorized purchases.

These chargebacks are serving their intended purpose and cannot be contested by merchants, they can only be prevented ahead of time.

Friendly fraud chargebacks occur when legitimate customers file chargebacks under false pretenses. Sometimes friendly fraud is intentional, but sometimes they happen because customers are confused by actions or communications from the merchant—the line between friendly fraud and merchant error can be blurry in these scenarios.

Friendly fraud chargebacks can (and should) be fought through chargeback representment.

True merchant error chargebacks happen when the merchant fails to uphold the terms and conditions or purchase that they entered into with the customer, or when they make processing errors when running the transaction.

When this occurs, the chargeback is valid and the merchant will not be able to fight it. It is extremely important to learn from their merchant error chargebacks and take steps to ensure that they don’t keep making the same errors in the future.

What are Merchant Error Chargebacks?

A merchant error chargeback is any chargeback that arises because the cardholder did not get what they paid for per their purchase agreement with the merchant, or when the merchant erroneously charges the cardholder with an incorrect, duplicate, or unauthorized transaction.

Often, cardholders will want to dispute a transaction when they are dissatisfied with the quality of the goods or services they received from the merchant. This is not a valid reason for a chargeback.

However, when a merchant misrepresents the goods or services they’re selling, does not follow through on a promised delivery or refund, or otherwise fails to uphold the terms of purchase that they informed the customer about prior to the sale, a chargeback may be appropriate and would be considered to be a merchant error chargeback.

Download the eGuide, 4 Reasons to Hire a Chargeback Management CompanyBy definition, merchant error chargebacks are preventable—they represent situations where the merchant had the opportunity to choose a different policy or course of action that might have avoided the circumstances that led to the chargeback.

Any time you receive a merchant error chargeback, study it closely, because you can always learn from these disputes.

What Common Merchant Errors Lead to Chargebacks?

Most merchant error chargebacks happen due to fairly predictable circumstances. The following is a list of frequently-seen issues that often lead to customer disputes and chargebacks.

Confusing Merchant Descriptors

When a cardholder reviews their billing statement and sees a charge that they don’t recognize, they will often assume fraud has occurred and call their issuer to dispute it, even if it’s simply the case that the company name in the descriptor is different from the storefront name that the cardholder knows.

Technically, these chargebacks should be considered friendly fraud, but they are generated by a commonly-overlooked error that merchants can easily fix.

Transaction Processing Errors

Most credit card transactions are straightforward and heavily automated, leaving little margin for error. Any time merchants manually key in a transaction or intervene to help a declining card go through, there is potential for transaction processing errors to creep in.

If the amount doesn’t match the receipt, or if the transaction was never properly authorized in the first place, a chargeback will surely result.

Unresponsive Customer Service

Never underestimate the power that excellent and attentive customer service has to neutralize potential chargeback situations. When a customer is frustrated or unhappy, you need to provide good communication, transparency, and a willingness to make things right for them.

Shipping Problems

You may feel like the product is out of your hands once it’s in transit with the delivery company, but merchants are still responsible for issues that crop up at this juncture. Unless you can prove that the product was delivered to the correct location in the manner approved by the cardholder, liability for delivery-related chargebacks usually falls on the merchant.

Misleading or Inaccurate Product Descriptions

While cardholders can’t demand a chargeback simply because they’re disappointed with the quality of a product, they can file a dispute if the merchant misrepresented the goods they were selling. This can get into subjective territory, but if you receive a chargeback for this reason, it’s time to review your marketing and website copy.

How Can Merchants Avoid Errors that Cause Chargebacks?

Analyzing your chargebacks to identify merchant error chargebacks and the specific circumstances that led to them is the best way to figure out where and how you need to change your business operations to prevent additional disputes.

There is, however, some general advice applicable to most merchants:

  • Use recognizable merchant descriptors that include your store name and contact information (ideally your website address).
  • Train your staff on correct transaction processing procedures.
  • Respond to customer calls and emails as promptly as you can. Take their concerns and complaints seriously.
  • Be generous with your refund policy. Once you have promised a customer a refund, don’t delay issuing it.
  • Process cancellation requests for recurring billing transactions immediately.
  • Provide live tracking information and signed delivery confirmation for every order you ship.
  • Make sure that your product and service descriptions are honest, accurate, and transparent. Don’t make big promises that you can’t really fulfill.


When you don’t analyze your chargebacks to discover their true root causes, it’s all too easy to assume that clever fraudsters and unscrupulous customers are responsible.

While this is often the case, merchant error is a leading cause of chargebacks that cannot be ignored. It is essential for merchants to find out where they may be making mistakes and eliminate as many preventable merchant error chargebacks as they can.

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