When to Accept a Chargeback

Chargebacks aren’t just an unavoidable cost of doing business. With the right techniques and strategies, many of them can be prevented, and many more can be fought through representment to recover lost revenue. However, representment isn’t the right choice for every chargeback. For many businesses, knowing when to fight and when not to can help make their chargeback management strategies more efficient and reduce overall costs.

To Fight or Not to Fight?

When faced with a chargeback, the first step for merchants is to assess the available documentation pertaining to the transaction under dispute. This involves carefully scrutinizing the records to determine whether they effectively refute the claim indicated by the chargeback reason code.

Merchants should examine all available evidence, including order details, payment receipts, and any communication records with the customer. By analyzing this documentation, merchants can ascertain whether there is sufficient proof to challenge the validity of the chargeback.

Additionally, it is essential for merchants to take note of any crucial evidence that may be missing or unavailable for the transaction in question.

This could include tracking information for shipped goods, confirmation of delivery, or proof of customer communication. Merchants should evaluate whether collecting such information for future transactions would enhance their ability to effectively dispute chargebacks in similar situations.

Merchants should assess the financial impact of accepting or disputing a chargeback, considering factors such as the transaction amount and the likelihood of successfully overturning the chargeback. When handling chargebacks in-house, representment requires time, effort, and resources on the part of the merchant. Merchants should weigh the potential benefits of disputing a chargeback against the costs involved in terms of time and manpower.


Merchants should also consider the long-term implications of these decisions for their business. If a merchant accepts all or most chargebacks, bad actors committing intentional chargeback fraud are more likely to victimize that merchant again. Larger companies could even gain a reputation among fraudsters as an easy target for this type of fraud.

When to Accept a Chargeback

While merchants typically aim to dispute chargebacks to recover lost revenue and protect their business interests, there are certain scenarios where accepting a chargeback may be the most prudent course of action. Understanding when to accept a chargeback is essential for merchants to effectively manage their finances and mitigate risks.

In cases where there is clear and compelling evidence of fraudulent activity, accepting the chargeback is the best course of action. These chargebacks are legitimate, and attempting to reverse them through representment will be a waste of time and resources.

For low-value transactions where the cost of disputing the chargeback exceeds the potential recovery amount, merchants may opt to accept the chargeback. Instead of investing time and resources in disputing negligible chargebacks, merchants can focus their efforts on more significant disputes that have a greater impact on their bottom line.

The line for which chargebacks are too small to be worth fighting will vary greatly from one merchant to the next. Disputing a chargeback can be more or less time-consuming depending on the types of evidence involved, the systems that contain them, and the expertise of the people creating the dispute package.

Merchants who rely on internal chargeback management teams will often fight some number of chargebacks with the highest potential return rather than setting a specific cutoff, since the number of staff hours devoted to chargeback management is less flexible.

Manage Chargeback In-House Or OutshoreThis means it may be correct for them to fight chargebacks with a low ROI in order to take advantage of available working hours during periods when there are few incoming disputes. Conversely, the threshold for which chargebacks are fought will be much higher when the number of incoming disputes increases.

Merchants who work with a chargeback management company are better able to adapt to fluctuations in chargeback volume and can therefore focus on working with the company to establish consistent guidelines for which chargebacks to accept and which to fight.

Best Practices for Handling Chargebacks

Effectively managing chargebacks requires merchants to implement a proactive and strategic approach to dispute resolution. By adhering to best practices and employing robust chargeback management strategies, merchants can mitigate financial losses, protect their reputation, and maintain positive relationships with customers. Here are some key best practices for handling chargebacks:

Keep detailed records of all transactions

Maintaining comprehensive documentation of all transactions, including order details, payment receipts, shipping/tracking information, and customer communication records, is essential for building a strong case when disputing chargebacks. By keeping meticulous records, merchants can easily access relevant information to refute unjustified disputes and demonstrate the legitimacy of transactions.

Resolve customer issues before they escalate

Establishing open lines of communication with customers and addressing their concerns in a timely and proactive manner can help prevent disputes from escalating to chargebacks. By promptly responding to customer inquiries, addressing product or service issues, and offering satisfactory resolutions, merchants can foster positive customer experiences and reduce the likelihood of chargebacks.

Understand and adhere to card network rules

Familiarizing themselves with the rules and regulations governing chargebacks set forth by card networks such as Visa, Mastercard, and American Express is crucial for merchants to effectively navigate the dispute resolution process. By staying informed about billing requirements, timeframes for response, and any special rules that apply (such as those affecting charges following a free trial), merchants can ensure compliance with industry standards and maximize their chances of success in disputing chargebacks.

Analyze data and identify opportunities

Analyzing chargeback trends can provide valuable insights into the root causes of disputes and help merchants identify areas for improvement in their business operations. By tracking chargeback metrics, merchants can proactively address underlying issues, implement preventive measures, and optimize their chargeback management strategies to minimize financial losses and mitigate risks.

By adopting these best practices and integrating them into their chargeback management processes, merchants can effectively navigate the complexities of chargeback disputes, protect their revenue, and uphold their reputation as trusted and reliable business partners in the digital marketplace.

If you want to learn more about effective methods for preventing and fighting chargebacks or if you have questions about how your company can improve its chargeback management strategy, come speak to one of our experts at Payments MAGnified in Dallas February 20-23. Visit us any time at Booth #405 or book a meeting in advance.

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