Shopify Chargeback Guide

For merchants making their first ventures into the waters of e-commerce, platforms like Shopify can be extraordinarily helpful. By serving as a single source solution for the biggest hurdles that new entrepreneurs face, these providers can be the deciding factor between a business idea becoming reality or not.

Unfortunately, chargebacks will find Shopify merchants as surely as they will any other, and Shopify imposes some of their own requirements on the process. What do merchants need to know when dealing with chargebacks that come through Shopify?

Table of Contents

1. How Do Shopify Chargebacks Work?
2. How to Manage Shopify Chargebacks
3. How to Fight Shopify Chargebacks
4. How to Prevent Shopify Chargebacks
5. What Is Shopify Protect?
6. Conclusion
7. Frequently Asked Questions

There are reportedly three million active Shopify stores on the web, making it the second-largest e-commerce ecosystem in the United States, behind only Amazon. One of the roles Shopify can fill for merchants is processing payments. That places them in the middle of all the merchants’ credit card transactions and makes them a key player in disputes and chargebacks.

In fact, Shopify will respond to the issuing bank and submit the merchant’s response in the event of a chargeback. Merchants who use Shopify must understand this and establish procedures to acknowledge and fight chargebacks from within the Shopify framework, as required, in order to stay on top of their disputes and keep chargebacks to a minimum.

How Do Shopify Chargebacks Work?

When a customer disputes a transaction and gets a chargeback on a purchase that was made through Shopify Payments, the disputed amount and a chargeback fee are either withdrawn from the merchant account or subtracted from the merchant's next payout from Shopify.

Shopify chargeback fees vary by country:

• US $15
• Canada $ 15
• Australia $ 25
• UK £10
•  Ireland €15 +23% VAT
• Austria, Denmark, Germany, Italy, the Netherlands, Belgium, and Spain €15
• Japan ¥ 1,300
• New Zealand $ 20
• Singapore $16.35
• Hong Kong HK$ 85

As with all chargebacks, the merchant has the opportunity to submit evidence contesting the cardholder's claim. The issuing bank will then review this evidence and make a decision. If the issuer finds in favor of the merchant, the transaction amount is returned and Shopify refunds the chargeback fee

How to Manage Shopify Chargebacks

Shopify Payments users can manage their chargebacks directly from within the Shopify admin.

• Viewing and Adding Evidence
  • From within the Shopify admin, go to Orders
  • Select the order under dispute
  • Click “submit response” in the chargeback banner
    
    
• Viewing All Chargebacks and Inquiries
  • From within the Shopify admin, go to Orders
  • Click “filter orders”
  • Choose “chargeback and inquiry status” from the drop-down menu
  • Select the value “open”
  • Click “add filter”

Shopify has four status categories for chargebacks and inquiries:

• Open: No response has been sent yet and evidence can still be added.
• Submitted: The response has been sent and the issuer is reviewing it.
• Won: The chargeback has been decided in the merchant’s favor.
• Lost: The chargeback has been decided in the cardholder’s favor.

The order page displays the dispute reason, response deadline, transaction details, and any issuer claim supplied by the bank. Shopify gathers some order information and sends the response on the due date. Evidence can be edited until that deadline, typically 7 to 21 days after filing. Submitting early locks the response.

Shopify accepts PDF, JPEG, and PNG evidence files. Each file must be 2 MB or smaller, and the combined limit is 4 MB. Only one file can be submitted per evidence category. External links, audio, and video are not accepted, so relevant online records should be captured in legible screenshots.

How to Fight Shopify Chargebacks

Inside or outside of Shopify, the basic approach for fighting chargebacks is fairly straightforward:

• Examine the chargeback reason code
• Determine the appropriate evidence necessary to disprove the claim
• Represent the charge and submit the evidence

For Shopify Payments customers, Shopify helpfully sorts the multitude of card network reason codes into eight broad categories:

• Fraudulent
• Unrecognized
• Duplicate charge
• Subscription canceled
• Product not received
• Product unacceptable
• Credit not processed
• General

Each category has different evidentiary requirements. For example, “fraudulent” chargebacks may be impossible to fight if they result from true criminal fraud, but many of these are legitimate transactions that the customer is disputing by mistake or out of an intent to defraud the merchant themselves.

These “friendly fraud” chargebacks can be fought by submitting evidence that clearly shows that the cardholder placed the transaction or received the product. Useful evidence may include AVS and CVV results, IP and device data, prior undisputed purchases, delivery to a verified address, and messages showing customer knowledge.

“Product not received” chargebacks can be fought with proof of delivery. Make sure to include both tracking information, including the shipping date, and proof that the address the product was delivered to matches the address on the order.

Product-unacceptable cases call for the original listing, fulfillment records, photos, support messages, and the accepted return policy. Duplicate and credit-not-processed disputes require transaction logs, receipts, and refund confirmations. Subscription cases should include billing terms, renewal notices, cancellation records, or post-renewal usage.

How to Prevent Shopify Chargebacks

Many Shopify disputes stem from fraud, fulfillment, billing descriptions, subscription communication, or service problems. Shopify Payments displays fraud-risk indicators on orders. Merchants can use automated settings or decline transactions that fail CVV or AVS postal-code checks, although some issuers do not support both checks.

Merchants can change their billing descriptors for more clarity to help with “unrecognized” chargebacks. The store name should appear prominently, along with a phone number customers can call. Note that when using Shopify Payments, "SP * " will appear at the beginning of the billing descriptor.

Customer service availability is crucial to preventing chargebacks. If it's easy for customers to reach support, many issues can be prevented from turning into chargebacks. On the other hand, if a customer is unable to get ahold of anyone, or if they give up after being on hold for an extended period of time, they're far more likely to turn to a chargeback as a way to address their issue.

Shopify provides useful advice for merchants about what types of evidence to submit for which chargebacks, but nothing beats firsthand experience when it comes to learning how to fight the specific types of chargebacks a business faces.

What Is Shopify Protect?

Shopify Protect can reimburse eligible fraudulent and unrecognized chargebacks, including the associated fee. The feature is limited to US merchants with a US Shopify Payments account and qualifying orders processed through Shop Pay. It does not cover claims involving delivery, product quality, refunds, or subscription cancellation.

An eligible order must contain only physical goods requiring shipment. Digital items, in-store pickup, and Shop Pay Installments are excluded. For subscriptions, only the initial order can qualify. Items must be fulfilled with supported carrier tracking within seven days and marked "in transit" within ten days. Address changes after checkout void coverage.

Protection should be confirmed on each order. For a covered chargeback, Shopify debits the amount and fee, immediately issues a credit, and handles the response. 

While Shopify Protect can be a valuable tool for merchants to reduce the number of chargebacks they're liable for, many types of chargebacks fall outside its protections.

Shopify's Network Dispute Resolution Program

Shopify's Network Dispute Resolution Program is intended to keep its merchants compliant with card network monitoring programs such as Visa's VAMP. Merchants with a high rate of chargebacks can face payout reserve requirements, among other consequences.

Merchants with an inclusive rate of at least 1.5% over the prior 90 days can be enrolled in the Network Dispute Resolution Program automatically, subject to a minimum order volume exclusion. Shopify may also enroll merchants manually if a review presents cause for concern.

When merchants are enrolled in the program, a 10% reserve is applied to Shopify Payments payouts. Eligible disputes are also refunded automatically. The merchant cannot submit evidence or appeal through Shopify. Exiting the program requires the 90-day inclusive chargeback rate to remain below 1% for 30 consecutive days.

Conclusion

Shopify makes it possible for thousands of merchants to get on the web and start selling without having to invest huge sums of money into development. Of course, with such comprehensive assistance comes some loss of control, and merchants who use Shopify Payments need to work with Shopify to manage and respond to chargebacks.

Careful fraud review, clear customer communication, documented fulfillment, and reason-specific representment form a sound defense. Regular chargeback-rate reviews can reveal patterns before account controls affect payouts.

Merchants can also work with a chargeback management company such as Chargeback Gurus to handle disputes across all payment processors, including Shopify Payments. Centralized case management can improve response consistency, reduce or eliminate the burden on internal teams, and provide a clearer view of chargeback activity across the business. 

FAQ

Does Shopify protect from chargebacks?

Shopify Protect covers eligible fraudulent and unrecognized chargebacks on protected Shop Pay orders. Coverage is limited to certain disputes.

 

How long do you have to respond to a Shopify chargeback?

The deadline shown in Shopify is usually 7 to 21 days after the dispute or inquiry is filed. Evidence can be edited until the deadline unless the response is submitted early, which locks further changes.