How to Prevent Chargebacks as an eCommerce Merchant in 2025

Chargebacks are one of the major threats to eCommerce businesses.

It can have multiple negative impacts on your business, especially the financial loss. While you can’t completely eliminate this issue, there are things you can do to prevent unnecessary chargebacks.

This guide will help you learn how to prevent chargebacks as an eCommerce merchant and how to manage a chargeback once/if it occurs.

Let’s start with some basics first!

What Are Chargebacks in eCommerce?

An eCommerce chargeback is a dispute raised by a customer to the payment provider or the credit/debit card company to reverse a certain charge deducted by an online business.

The purpose or reason the payment providers have this chargeback feature is to protect customers from fraudulent activities and erroneous transactions.

Here’s an example of an erroneous transaction: A customer purchased one item for $100.00 but was charged twice, i.e., a total of $200.00 due to some error. In this case, the customer can initiate a chargeback process to claim back the $100.00 which was deducted incorrectly.

However, there’s an issue with this chargeback feature — some users misuse chargebacks unnecessarily or unethically. Meaning, some people use chargebacks as fraud against the business owner.

Why Do Chargebacks Occur in eCommerce?

According to ClearSale, 30% of chargebacks occur due to fraudulent purchases from stolen cards. The second highest, 26% of chargebacks are due to the complaint that the ordered product was never delivered.

However, there are multiple other reasons or scenarios where chargebacks may occur — including valid ones and fraudulent chargebacks. To understand this, let’s check all the different types of chargebacks:

Types of Chargebacks in eCommerce

We can categorize the types of chargebacks into three categories:

1. Chargebacks Caused by Merchant Errors

• Duplicate charge

As we saw in the example earlier, this happens when a customer purchases something from your online store and is charged twice or multiple times for a single transaction.

• Wrong amount charged

Let’s take an example: A customer wanted to purchase an item priced at $150 but was charged $250. So, the customer may raise a chargeback request for this.

• Compliance issue

As a business owner, you need to comply with the terms, policies, and requirements set by the payment processors. If it’s not done, it could result in a chargeback as a consequence of non-compliance.

• Order not received or damaged item received

This may not be completely a merchant's fault but sometimes a customer may not receive the ordered items due to shipping errors. Or it may be broken or damaged by the time the customer receives it. Thus, as a business owner, you should check whether it’s your fault or the delivery partner's.

2. Chargebacks Raised Due to an Actual Fraud

• Transaction done with a stolen card or hacked account

This is the type of chargeback where the customer is not at fault but has become a victim of fraud. For example, a customer’s card was stolen or lost and a fraudster purchases something from your store. Thus, once the customer finds the “unknown” charge in the statement, it may lead to a chargeback.

3. Friendly Fraud Chargebacks by Customers

• Buyer's remorse

“Buyer’s remorse” is the term used for scenarios where a customer willingly purchases something, there’s nothing wrong with the product or service, but still regrets the purchase due to personal reasons. Thus, a customer may go for a chargeback instead of requesting a refund or if you have denied the refund request.

• Digital products

Sometimes, a customer might purchase digital products with the intention to only download and access the product. Once the purpose is served, the customer might unethically raise a chargeback request to get the money back.

Side note: This is one of the reasons most digital products have a strict policy of no refund once the product is delivered electronically.

Some businesses may have relatively more chances or instances of chargeback fraud activities. ClearSale shared observations on the following types of merchandise that are mostly at risk of chargebacks:

• Clothing & Furniture
• High-end merchandise
• Digital content
• Products that can easily be resold
• Products that are easily translated into cash

What Are The Impacts Of Chargebacks On Your Business?

Chargebacks can have multiple types of negative impacts on your business. Here are some major ones:

• Loss of revenue:

Once a customer raises a chargeback, and if you lose the dispute, it’ll create a negative impact on your finances. When you have already delivered the products in good quality, and a chargeback occurs, you may lose your hard-earned money for the delivered products.

• Damage to the brand’s reputation:

This can have multiplying implications: 1. The customer who has to raise a chargeback due to an error from your end will be hesitant to purchase from your brand again. 2. That customer can share the negative experience with family and friends, or worst case, on social media. Thus, it can cause major damage to the credibility of your business.

• Hassle & cost of dispute settlements:

Once the dispute is raised by a customer, you’ll need to go through all the hassles of providing evidence to protect your money. This not only consumes your time but also resources in the entire process. It can create an additional burden of operation costs.

• Consequences from payment providers:

If the frequency or the number of chargeback instances is too high, the payment processor may hold your payment. Thus, it can impact your cash flow. In the worst case, your payment processor might completely restrict your business from its services. Or you may have to pay the higher processing fees.

Learn more: Shopify Payments vs. Paypal: What's Best for You in 2025?

How to Prevent Chargebacks Before They Occur

As a business owner, you must follow all the preventive measures to avoid chargebacks even before they occur. Once a customer raises a chargeback request, the payment processor or credit card companies are likely to favor the customer.

It can be difficult to protect your business without having proper evidence to defend your side. So, make sure to take care of all these to protect your business from chargebacks:

Best Practices to Prevent Chargebacks as an eCommerce Merchant

1. Prepare Robust Store Policies

Sometimes, customers might raise a chargeback request due to a loophole in your store’s return or refund policy. That’s why you must ensure that your store policies are detailed and cover all possible scenarios where customers can and cannot request a refund.

It’s advisable to seek help from a legal professional who specializes in eCommerce store policies. Legal professionals know the most common and even odd scenarios where customers can incorrectly or unethically take advantage of your weak store policies. They can mitigate such risks by precisely covering all the scenarios.

One more important thing is to make the store policies easily accessible for your customers. Apart from detailed store policies, you can also briefly cover the most frequent scenarios on the FAQs page.

Here’s an example of how Fashion Nova has explained its returns process along with FAQs:

Alt-text: Return policy and process of Fashion Nova

2. Maintain Accuracy in Product Inventory

Imagine a customer placed an order in your store and was able to complete the transaction but the product is not in stock. This can lead to frustration and the customer might go for a chargeback instead of requesting a refund from your customer care.

This will be an unnecessary chargeback due to inaccurate inventory management. So, you must manage your inventory with accurate tracking of the available stock and make sure it’s updated on your storefront on a real-time basis.

Pro tip: Set up a Shopify Flow to trigger low inventory levels and send notifications to your admin via email or Slack. You can define a certain inventory level to trigger this action. For example, whenever the stock goes to 5 or fewer units, you can trigger a Shopify Flow to send you a notification for the same and you can take care of restocking the items in a timely manner.

3. Provide Great 24/7 Customer Service

Many issues can be resolved before they escalate to severe levels if you have excellent and easy-to-access customer service.

When customers encounter an issue with the order or the received shipment, they’re likely to contact your customer support teams. If you don’t offer human support or if customer support isn’t available even after multiple attempts, it can lead to chargebacks as the customers would feel helpless.

Also, when customers come up with an issue to your customer support team, make sure the representatives are empathetic toward the customer’s pain points. You don’t want to end up increasing the customer’s dissatisfaction with your brand.

Great customer support can turn an unhappy customer into a raving fan.

4. Set a Clear Billing Descriptor for Card Statements

A billing descriptor is a specific text that appears on your customer's credit/debit card statements and helps them identify the transactions.

If this billing descriptor is not clear enough to recognize that the transaction was made with your brand, the customer may request a chargeback mistakenly.

Make sure your billing descriptor is simple and includes your brand name. You can even include your website and phone number.

5. Write Precise and Smart Product Descriptions

Customers need to be provided with transparency when purchasing any product. Your product descriptions can help them make an informed decision.

If your product descriptions have missing or misleading information, it can lead to a wrong purchase. Eventually, the customer would feel dissatisfied and cheated. Thus, your poor or inaccurate product descriptions can also lead to chargebacks.

So, what’s the solution? Make sure the  following aspects are taken care of on your product pages:

• Size guide instructions: Certain products may have a slight mismatch in size. That’s why you might notice some merchants advise customers to purchase 1 size unit higher or lower to get the exact match.
• Color instructions: Product colors may look different on the actual product than on the digital screens. You can advise customers that colors may not be exactly the way it looks on the screen. Thus, the right expectations are set before they purchase a product.

A popular eCommerce brand — Gymshark — goes even a step further by providing its customers with a size calculator on product pages.

6. Help Customers with Order Confirmation Details

Setting up order confirmation flow is a common practice in eCommerce. However, the way you manage your order confirmation flow is crucial.

When sending order confirmation emails, you can set expectations regarding the estimated delivery times or any possible delays.

For example, during the peak seasons like Black Friday and Cyber Monday, there are possibilities of supply chain issues. Thus, when delivering such orders you can notify the customer of the estimated delivery time along with a possible delay of 1-2 days due to the high demand and shipments. Most customers would understand the situation and be supportive of it as long as you’ve communicated it.

7. Handle Order Cancellations with Care

There are instances where you may have to cancel orders due to unavoidable circumstances. During such instances, you must ensure that you’re handling the case with clear and empathetic communication.

Let customers know the reason why you aren’t able to process the order and show an apology. Proactively inform the customer about how the refund will be processed and how long it may take to appear in their statement.

You can even go a step further and reward customers with some sort of incentive if it’s solely your fault. It can help make the situation better and avoid customer dissatisfaction.

8. Manage Subscription Renewals Effectively

Even if the customer has opted for auto-renewal of the subscription services, you should take responsibility for proper communication before the charge is deducted for the renewal.

Help customers with advance notifications before the renewal charge is to be deducted. For example, you can notify customers 3 days before and on the day of renewal about the charge that’s going to be deducted.

That way, if the customer doesn’t want to continue the subscription, they’ll take action from their end instead of raising a chargeback post the payment deduction.

9. Maintain Proper Records

This isn’t exactly a chargeback prevention method but it’s a proactive approach that could be helpful in some unfortunate chargeback instances. Keep the evidence handy regardless of the risk level of the orders.

Learn more: 10 Best Shopify Payment Options for Your Business

How to Prevent Chargebacks on Shopify

10. Use Fraud Prevention Technologies

Your eCommerce tech stack must include advanced technologies to identify possible fraudulent transactions. Using Shopify can help you in more than one way to tackle and manage fraudulent transactions.

Shopify features for fraud prevention:

• Fraud analysis: 

If you're using Shopify Payments (or even with most third-party payment processors) on your Shopify store, you can use the fraud analysis feature. It helps you identify the risk levels and make the decision on whether to fulfill or cancel the order.

• Shopify Protect: 

Currently, the Shopify Protect feature is available to only US-based stores that use Shop Pay. It helps you safeguard eligible orders from fraudulent chargebacks.

• Shopify Flow: 

Shopify Flow is Shopify’s automation tool that helps you create automated workflows that can identify risky orders and take certain actions based on your set conditions or rules.

• Other fraud prevention features:

Apart from the above-mentioned features, Shopify also offers several other features including Dynamic 3DS, Card testing protection, Dispute management, and Proxy detection. However, to use these features, your store must have Shopify Payment configured on it.

Learn more: 

How to Prevent Shopify Fraud for Your eCommerce Store

Shopify resource: Fraud prevention 

How to Prevent Chargebacks on PayPal/Stripe

So far, we’ve covered most of the preventive actions you could take to avoid chargeback. Now, let’s take a look at some additional tips if you’re using PayPal or Stripe as payment providers.

PayPal suggests that merchants should advise their customers to file a dispute with the PayPal Resolution Centre instead of submitting a chargeback request to the respective credit or debit card company.

With Stripe, you can also make use of its analytics tool for data analysis to recognize any patterns or anomalies that can help you identify possible friendly fraud.

How to Handle Chargeback Disputes

Let’s say you have taken care of all the aspects to prevent the chargeback; however, there’s still a possibility that a chargeback dispute may occur. You can’t just completely obliterate it.

So, if you’ve received a chargeback dispute, you should follow the best practices to address it properly and win the dispute to save your business from financial loss.

Here are the important steps you should take care of:

Step 1: Investigate the issue

First off, you need to figure out what actually caused the chargeback and investigate the case thoroughly. The chargeback could be an actual fraud, an error, or it could be friendly fraud as we discussed earlier in this article.

If it’s a genuine chargeback due to fraud or error on your part, obviously, there’s nothing much you can do about it. You’ll have to accept the reversal of the funds. But the friendly fraud cases are something where you should fight as long as you’re on the right side.

Sometimes, you may also have to decide whether it’s worth fighting for in friendly fraud cases. In a nutshell, any further action depends on the root cause and assessment of the criticality.

Step 2. Prepare the rebuttal

2.1 Check the deadline for submitting the rebuttal

Make sure to check the deadline to submit your rebuttal. Different companies may have different timeframes or the number of days to submit the rebuttal. Broadly speaking, the deadline could be anywhere between/around 20-45 days.

So, you’ll have sufficient time to respond to a chargeback request; however, don’t delay your response unnecessarily.

2.2 Gather evidences and write the rebuttal letter

Make sure you have all the evidence about the entire transaction that could help you prove that the chargeback wasn’t valid. E.g., order invoice, shipping and tracking details, delivery confirmation from the carrier, etc.

Make sure to write a robust rebuttal with all the details linking to the available evidence.

Step 3. Submit the dispute

Submit all the required details as per the guidelines provided by the payment provider.

Once you’ve completed all the necessary steps, all you can do is wait for the final decision. Close the case based on the final verdict and take notes from the case if there are any further areas of improvement in your processes.

Final Thoughts on Chargeback Prevention

While fraud chargebacks are a big challenge in the eCommerce industry, there are also great solutions to deal with them in the best possible manner.

It’s your hard-earned money. Don’t simply let it go for no reason. Start preparing for all the preventive steps to build a solid system that can help protect your business from wrong chargebacks.

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FAQs About Chargeback Prevention