Preventing Black Friday Fraud & Chargebacks

Black Friday is one of the biggest shopping days of the year, offering merchants an influx of customer interest and sales. Yet, with this increase in activity comes a heightened risk of fraud. Black Friday’s high transaction volumes, limited-time discounts, and frantic shopping environment create opportunities for fraudsters to exploit weaknesses in online and in-store systems.

At the same time, legitimate customers are more likely to dispute purchases they regret, can’t afford, or didn’t receive as expected. Merchants need to stay vigilant to protect both their revenue and their customers' experience.

Understanding the types of fraud and chargebacks that commonly occur during Black Friday, along with prevention and response strategies, can help merchants better prepare. Let's take a look at their common causes and how to implement strategies to reduce exposure to fraudulent transactions.

The Risks of Black Friday Fraud

Black Friday, as well as Cyber Monday and the extended holiday shopping season, brings a noticeable spike in fraudulent activities. This trend is amplified by the growing popularity of online shopping, which has outpaced traditional retail sales. With more shoppers and sales moving online, the need to protect against fraud becomes more pronounced.

For merchants, understanding the specific risks associated with Black Friday and preparing in advance can reduce the impact of fraud on their business.

Chargebacks associated with fraudulent purchases add up, and merchants often cannot recoup these costs. The lost revenue in combination with the chargeback fees create a double hit on profitability.

Common Methods of Black Friday Fraud

To effectively counter Black Friday fraud, merchants must first recognize the primary types of fraudulent activity that increase during this time. Below are some of the most prevalent forms of fraud encountered during holiday sales events.

Credit Card Fraud

In online shopping, where physical cards are not presented, merchants are especially vulnerable to credit card fraud. Fraudsters use stolen card information to make unauthorized purchases, with merchants shouldering the cost when fraud is detected. As Black Friday promotions drive online purchases, instances of credit card fraud also increase.

Account Takeover (ATO) Attacks

Fraudsters may target customer accounts through account takeovers. Using phishing emails, social engineering, and credential-stuffing attacks, they gain unauthorized access to legitimate accounts. Once inside, fraudsters can exploit saved payment methods to make fraudulent purchases.

Gift Card Fraud

Gift cards are a common target for fraud. Fraudsters may purchase gift cards with fraudulent payment credentials to resell them later. The increased volume of holiday-related gift card purchases can disguise fraud by making large gift card purchases or purchases from first-time customers seem less suspicious.

Return and Refund Fraud

Merchants often see a rise in returns after Black Friday, some of which may be fraudulent. Return fraud can be costly for retailers, particularly during the holiday season, when lenient return policies are more common.

Coupon and Promotion Abuse

With Black Friday promotions in full swing, fraudsters will exploit promotions and offers in any way they can. They may create multiple accounts to take advantage of new customer rewards or use bots to make the most of limited-time promotions. Abuse of promotional offers can lead to lost revenue and can impact genuine customers trying to access deals.

Fraud Prevention Strategies for Black Friday

Implementing robust fraud prevention measures is key to reducing a merchant’s vulnerability. Below are methods that can strengthen defenses against fraud and help merchants better manage Black Friday risks.

To identify unusual purchasing patterns and block suspicious transactions, merchants can use multi-layered fraud detection systems. Combining machine learning tools with simple checks like AVS and CVV matching can provide a robust defense against many types of fraud.

Advanced fraud detection systems analyze factors such as device location, transaction velocity, and account activity to identify irregular patterns, helping to stop fraud before it occurs.

Adding an extra layer of protection for customer accounts is a proactive way to prevent account takeovers. Multi-factor authentication (MFA) requires users to verify their identity beyond just a password, reducing the risk of unauthorized access. Encouraging customers to enable MFA and making it easy to set up can help merchants limit account takeover attempts during Black Friday.

Setting velocity rules allows merchants to limit the number or value of purchases within a set time frame, reducing the potential for fraud. For example, velocity rules can be set to block excessive purchases from the same account, IP address, or credit card within a short time period. By limiting the speed and frequency of transactions, merchants can more easily detect and block high-volume, fraudulent purchase attempts.

Examining fraud data from previous Black Friday events can help merchants spot patterns, high-risk areas, and transaction types that may be vulnerable to fraud. For example, if chargebacks were higher for certain products or in certain regions, merchants can tailor their strategies to address these patterns.

Friendly Fraud & Other Chargebacks

While fraudulent transactions are a major concern during Black Friday, a growing share of chargebacks are not caused by criminal behavior at all. These disputes can arise from breakdowns in communication, unclear policies, or post-purchase confusion. For merchants, the impact is the same: lost revenue, added fees, and unnecessary strain on support teams.

Friendly fraud occurs when customers file disputes for legitimate purchases to receive a refund while retaining the purchased item. While this may sometimes be unintentional, it can also be a way for bad actors to defraud merchants.

Chargeback rates often increase during Black Friday, as customers may make impulse purchases they can’t afford and seek to recover their money through a chargeback without returning their purchase.

In other cases, a customer might fail to recognize a charge on their statement, assume a shipment was lost, or struggle with a return process that seems too complex. Even when merchants have acted in good faith, these moments of uncertainty or frustration can lead customers to contact their issuer instead of the merchant.

Preventing non-fraud chargebacks starts with setting clear expectations through transparent product descriptions and accurate shipping timelines. The latter can be difficult to nail down during the holidays, so some merchants provide a warning when items might not arrive before Christmas.

Sending confirmations, shipping updates, and delay notices can reassure customers before frustration turns into a dispute. Making return and refund options easy to find, and responsive support easy to reach, further reduces the impulse to file a chargeback.

In many cases, these disputes are avoidable with small operational adjustments. The same attention to detail that keeps fraudsters out can keep legitimate customers satisfied, ensuring that the sales surge of Black Friday translates into long-term loyalty rather than post-holiday losses.

Planning Ahead

Each Black Friday brings new data, new threats, and new lessons. Reviewing what worked—and what didn’t—helps merchants refine their prevention strategies before the next surge. Fraud tactics evolve quickly, but so do customer expectations. A thoughtful post-season review should consider both: how effectively fraud was blocked, and how many disputes could have been prevented through clearer communication or operational improvements.

By understanding the types of fraud and chargebacks that commonly arise and preparing with multi-layered defenses and data-driven strategies, merchants can protect their revenue and the future of their business. Strategic planning for fraud prevention ensures that merchants can focus on maximizing sales, confident that their business and customers are safeguarded.