ChargebacksSeptember 17, 2021

Fighting Chargebacks: The 5 Mistakes Merchants Should Avoid

Because the internet provides great anonymity and transactions are conducted at arm’s length, there exists the unfortunate misconception that online fraud is not really hurting anyone. This deception couldn’t be further from the truth. A recent 2021 statistic cited a sobering 15% increase in online retail fraud since before Covid hit the nation, much of it due to bogus chargebacks.

It’s not just fraudsters who are at work—using stolen credit card information to make purchases. More and more, businesses are being confronted with waves of friendly fraud. These are customers who, in bad faith, make claims that the items they ordered weren’t received, were damaged, or otherwise did not meet their expectations. It’s one thing to work out legitimate issues with the merchant; it’s another when people deceive banks and repeatedly abuse policies meant to serve the customer.

When the inevitable happens, and you receive a chargeback, whether it’s fraud-related or not, if you don’t have a strategy for how to dispute the claim with the bank, there’s a good chance you’re leaving money on the table.

5 Strategies to Help Fight Chargebacks

The following are five strategies to help online retailers fight chargebacks in a way that is most likely to lead to a positive outcome.

1. Education: Know What the Banks are Looking for

When faced with a chargeback, the first step is to counter the claim with the issuing bank. Most institutions have set deadlines and limitations for counter-filings, so it pays to be mindful. A counterclaim must have merit and provide compelling evidence to back it up, tailored to the bank’s unique reason codes. Banks can be quite particular about what evidence they are looking for and the format in which it is communicated. They also do not want more evidence than they request in their reason code guidelines. Even something as seemingly mundane as the order in which evidence is listed can represent the difference between a win and a loss. Be clear and concise and avoid emotional responses.

2. Reason Codes that Seem Unreasonable

Many people have a tough time understanding the various banks’ reason codes. To make matters more complicated, these codes are dynamic, often evolving based upon consumer expectations and the various card brands. Keeping abreast of all developments is essential in the fight against chargebacks. When submitting a counterclaim, evidence must be submitted to support the reason cited. While this might sound obvious enough, each bank has its own unique and complex set of requirements for what they consider allowable evidence for each reason type.

For example, as part of its overhaul in 2018, credit giant Visa consolidated its twenty-two reason codes into four distinct categories: fraud, authorization, processing errors, and customer disputes, each with its own guidelines. Ensuring that business teams are up to date with major chargeback reason codes is key to helping retailers resolve and win disputes more quickly and consistently.

3. Look for a Win-Win!

A common misconception is that “winning” a dispute in pre-arbitration is a true win. It is not, as it only represents half the battle. Businesses should be aiming for a win-win.
When a merchant decides to dispute a chargeback, they hope that after looking over the evidence, the issuing bank will immediately conclude that the chargeback was illegitimate and reverse it. Unfortunately, that’s not always the end of the story, and that’s where pre-arbitration comes in.

When moving into the second phase, retailers must submit their case again or accept liability. Furthermore, many merchants erroneously believe that their win rates are higher than they truly are because they are only tracking the initial outcome of their cases without realizing how much revenue they already lost to pre-arbitration. The vast majority of cases that begin with pre-arbitration will ultimately be ruled in the cardholders’ favor.

Having a detailed pre-arbitration policy in place that follows a consistent initial response process to avoid arbitration altogether will positively impact your win-win rates. Also, remember that tracking must be an essential aspect of your chargeback strategy. Without proper tracking, it will become impossible to know whether any of your current strategies are working.

4. Ignoring Patterns and Red Flags

Don’t lose sight of any patterns, red flags, or troublesome statistics that may suggest an increase in chargebacks. Is there a reason why chargebacks are increasing at this particular time of year (or anytime for that matter?) Are there process changes you can make in your operations or customer support services to reduce the likelihood of future cases? Understanding the various reason codes outlined by banks for chargebacks and how they relate to your business’s internal processes will allow for the necessary adjustments in advance of this type of fraud activity. The key is proactivity – anticipate, identify and rectify issues before they translate into lost revenue.

5. Not Tracking Operational Costs

Disputing chargebacks is both time-consuming and a drain on human resources. Often, businesses fail to track the resources dedicated to fighting chargebacks. A business that spends an inordinate amount of time and manpower in the rebuttals it launches, without the results it anticipates, should reevaluate its strategy.

As scheming fraudsters become stealthier, quicker, and more sophisticated in their activities, the threat may seem overwhelming to businesses. The good news is that companies like NoFraud, specialize in anti-fraud strategy and services, including its Chargeback Management service. Save time, money, and brainpower by offloading your entire chargeback management process to NoFraud’s expert chargeback specialists. Their seasoned professionals will investigate, assemble evidence, prepare compelling rebuttals, argue before the issuer, and provide you with feedback on avoiding these types of chargebacks in the future.

To learn more about NoFraud’s Chargeback Management offerings, visit


Chava Shapiro

Content Writer for NoFraud

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