Ecommerce Chargeback Prevention 101

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Last Updated on October 11, 2023 by Corepay

Are you an online merchant looking to protect your business from the devastating impact of e-commerce chargebacks? In this article, we will break down everything you need to know about preventing e-commerce chargebacks and offer the best solutions to deal with them.

With the increasing popularity of online shopping, the risk of chargebacks is higher than ever. But don’t worry; there are effective strategies you can implement to safeguard your business.

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Key Takeaways

  • Use fraud prevention tools like CB-ALERT to reduce chargebacks significantly.
  • Clear communication of transaction details and excellent customer service can help prevent chargebacks.
  • Issuing refunds and using clear billing descriptors can also contribute to preventing chargebacks.
  • Maintaining accurate records, monitoring chargebacks, and scrutinizing irregular orders are essential prevention measures.

What Is An Ecommerce Chargeback?

ecommerce prevention infograph

An e-commerce chargeback is a consumer protection request for reversing charges on a transaction. It can occur due to a mistake or malicious intentions. The purpose of chargebacks is to protect consumers from fraudulent charges and prevent them from being financially responsible for unauthorized withdrawals.

When a customer disputes an unauthorized transaction or unsatisfactory goods/services, they can go directly to their bank to initiate a chargeback. This process involves submitting a complaint to the card issuer or bank, which then investigates the purchase and requests transactional evidence from the merchant.

The merchant is responsible for the claim amount and fees if the complaint is justified. To prevent chargebacks, merchants should provide evidence of a valid transaction and be aware of potential red flags for chargebacks.

Why Do E-commerce Chargebacks Occur?

One common reason for chargebacks in online retail is when customers feel frustrated or dissatisfied with their shopping experience. This can happen for various reasons, including:

1. Poor product quality: When customers receive products that do not meet their expectations regarding quality or functionality, they may initiate a chargeback to recover their funds.

2. Late or non-delivery: If customers do not receive their orders within the promised timeframe or if the products never arrive, they may dispute the charge to get a refund.

3. Unauthorized transactions: Customers may notice charges on their credit card statements for purchases they did not make, leading them to file a chargeback to protect their financial interests.

4. Misleading product descriptions: If customers feel that the product descriptions provided by the merchant were misleading or inaccurate, they may request a chargeback as a form of recourse.

To minimize chargebacks related to customer dissatisfaction, merchants must provide accurate product information, ensure timely delivery, and promptly address customer concerns.

What Is The Cost Of E-commerce Chargebacks?

When it comes to the cost of e-commerce chargebacks, there are several key points to consider.

First, the transaction charges incurred by the merchant for the initial purchase can add up quickly.

Additionally, there are chargeback fees imposed by credit card issuers or banks, which can further eat into the merchant’s bottom line.

Finally, there is the potential brand and reputational damage that can result from chargebacks, which can impact future customer trust and loyalty.

To minimize these costs, it’s essential to be proactive in preventing and managing chargebacks effectively.

To summarize the above:

Transaction Charges

Merchants must refund the transactional charges.

Chargeback Fees

Chargeback fees can quickly erode a merchant’s profits and stability, making it crucial for businesses to manage and minimize these charges actively. Merchants should implement proactive measures to prevent chargebacks and their associated fees.

Chargeback fees typically range from $20 to $100 but vary significantly.

Chargeback Penalties

To avoid costly penalties, merchants must proactively manage and minimize chargebacks in their e-commerce business. Chargeback penalties can significantly impact the bottom line, leading to financial losses and potential account termination.

Brand/Reputational Damage

Protecting your brand and reputation is crucial in the competitive world of e-commerce. A single negative experience can tarnish your image and drive potential customers away. It is important to take proactive measures to prevent brand and reputational damage from chargebacks.

Here are three key strategies to safeguard your brand and reputation:

  • Provide exceptional customer service: Ensure prompt and effective communication with customers. Address their concerns promptly and strive to resolve any issues or disputes satisfactorily.
  • Deliver high-quality products and services: Focus on maintaining product/service quality. Accurately describe products and meet customer expectations. This will reduce the likelihood of dissatisfied customers resorting to chargebacks.
  • Build trust and transparency: Establish clear policies, terms, and conditions. Communicate them clearly to customers. Be transparent about billing descriptors and provide accurate transaction details to avoid confusion or misunderstandings.

How To Prevent E-commerce Chargebacks?

By implementing effective fraud prevention measures, you can safeguard your hard-earned revenue and avoid the devastating consequences of unauthorized transactions or unsatisfactory goods/services.

  • Utilize robust fraud prevention tools: Incorporate advanced tools like 3DS2 authentication, RDR, and chargeback alerts to combat fraudulent activities proactively. 
  • Establish a clear merchant descriptor: Enhance your company’s visibility on statements using a precise and recognizable merchant descriptor. Ensure that your descriptor accurately reflects your credit repair business.
  • Partner with CB-ALERT: CB-ALERT specializes in assisting credit repair companies in preemptively dealing with fraudsters and preventing fraudulent transactions. 
  • Implement Customer Authentication: Implement customer authentication measures to strengthen your defense against chargebacks, as it enhances transaction security and verification.
  •  Provide exceptional customer service: Swiftly respond to customer inquiries and diligently resolve issues to maintain high customer satisfaction levels, minimizing the likelihood of chargebacks due to dissatisfied customers. 
  • Offer refunds when appropriate: In many cases, refunding is more cost-effective than facing a chargeback. Refunds also improve the chances of retaining the customer. 
  • Verify customer funds: Prioritize verifying customers’ financial capabilities before allowing them access to credit repair services. 
  • Maintain accurate records: Keep detailed records of all credit repair transactions, including customer contact information, order details, and communication history. These records serve as valuable evidence in chargeback disputes. 
  • Monitor and address chargebacks promptly: Utilize chargeback alert systems to monitor and respond quickly to potential chargebacks, preventing them from escalating into more significant issues.
  • Conduct IP verification: Stay vigilant for unusual orders from unfamiliar locations or significantly higher transaction amounts than usual. 
  • Perform IP verification to ensure the legitimacy of such transactions and prevent potential chargebacks.


Chargebacks tend to hit e-commerce merchants the hardest as all transactions are card-not-present. You can end your chargebacks by utilizing the 10 steps we mentioned above and partnering with a chargeback management team.


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