The 2024 Cardholder Dispute Index is designed to offer retailers, financial institutions, and other stakeholders a look at the current state of chargebacks from the consumer’s perspective. Based on surveys commissioned by Chargebacks911® in partnership with TSG (The Strawhecker Group), this study provides a snapshot of how cardholders view the entire chargeback process, from initial dispute through arbitration.
While this list is by no means definitive, it’s relevant to note that all the people surveyed admitted having recent experience with filing a dispute or chargeback. The data herein could therefore prove useful for merchants attempting to analyze how their current customer base understands, uses, and misuses the chargeback process.
As a survey-based report, however, the results are built on self-reported data. That no doubt skews the information to some extent, as the person completing the survey may have estimated numbers, misunderstood the questions, or simply refused to divulge some information.
All the same, we feel that collectively, the opinions and responses provided here represent a fairly accurate picture of how disputes are viewed by the consumer market. Regardless of an organization's actual experience with chargebacks, the value of the report lies in demonstrating the cardholder’s mindset.
80% of respondents opt for credit or debit cards over other payment methods when shopping online.
Digital wallets are now preferred by one in 10 consumers for both online and in-store purchases; Peer-to-peer (P2P) payment methods are the second most-popular alternative.
Consumers under the age of 35 prefer banking through a mobile app three-to-one over those aged 55 or over.
84% of respondents reported they’ve used a free trial offer at least once; over ¾ believe that “try before you buy” offers a direct benefit to consumers.
Nearly 90% of respondents want banks to be able to cancel subscription services on their behalf.
Over 90% of respondents trust their bank to correct any reported fraud issues.
Participants who filed a claim with the bank over the last year reported an average dollar value of $76 per dispute. Primary categories for disputed transactions include travel & entertainment, physical goods & retail, and software.
Over 80% of respondents reported being satisfied with their dispute experience.
Half of survey participants admitted disputing a transaction with the bank without first contacting the merchant about the issue.
Three-quarters of survey participants consider disputes a valid alternative to requesting a merchant refund.
Nearly 90% of respondents said successfully disputing a transaction would make them more likely to try it again.
According to survey respondents, US consumers on average own 5.5 payment cards. This includes bank credit cards, retail (store) cards, and debit cards. Responses also indicate that individuals with an annual income above $75,000 tend to possess more credit/debit cards than the average consumer.
Breaking the numbers down by gender shows that, on average, male respondents have 1.4 cards more than females.
While credit cards are still far and away the preferred payment method for online shopping, alternatives are quickly gaining popularity. Digital eWallets are showing the most growth potential, especially considering they are being used both online and in-store.
But, while new payment methods are making inroads, nearly 80% of respondents report that they still favor payment cards for eCommerce transactions.
This preference for payment cards increases based on user age. Respondents under the age of 45, for example, were nearly three times more likely to favor mobile payments, compared to participants aged 45 and older.
Digital wallets are now preferred by one in 10 consumers, but since digital wallets must be tied to a payment card, they are less an alternative payment method than simply a different way to pay with a card.
Consumers also seem to be embracing peer-to-peer (P2P) payment methods, which are the second most-popular alternative payment method among consumers. This is made even more significant given that this option is more typically thought of as a way to transfer money between individuals.
As consumers shift their payment preferences, relying solely on traditional ways of accepting payments will almost certainly result in an increasing loss of customers. In response, merchants are gradually adapting their business models to meet changing customer expectations.
Providing payment alternatives is only one way retail models are evolving. For instance, buy online pick up in store (or “BOPUS”) offerings grew rapidly during the covid-19 pandemic, and are expected to become much more common in coming years.
"With the popularity of subscription services and free trail offers by merchants and consumers alike, the industry is seeing an increase of first-party fraud disputes which has fueled the need for change within the dispute process.
In many cases, it seems increasingly difficult to cancel a subscription by following the merchant process, so cardholders commonly initiate disputes with their issuing bank."
Susan Horne
TSG Senior Associate
While alternative payment methods are gaining popularity, even existing services like subscriptions and free trials are changing to better fit the contemporary shopping ecosystem.
The global subscription eCommerce market, for example, already tops $100 billion annually. As subscriptions are used for an ever-widening list of products and services, that number is expected to expand to nearly $2.4 trillion by 2028.
Consumers appear to love having subscriptions, but we see a different story when it comes to canceling unwanted subscriptions. In the case of personal subscriptions, 87.6% of respondents wanted their banks to provide a way to cancel a service on the subscriber’s behalf.
There are a number of reasons customers may not want to contact the retailer, including odd service hours, complicated unsubscribe processes, and pushy agents. In many cases, the customer simply forgets the subscription, then discovers months later they are still being billed.
Another evolving payment method is installment plans offered by online retailers. Many consumers find paying in installments easier, more flexible, and a way to avoid credit card interest. Over half of the respondents said they had used that method to pay for at least one online purchase.
According to a 2021 consumer survey, men in the United States used buy now, pay later (BNPL) more often for online shopping than women. Nevertheless, 51 percent of the female respondents said they had used a BNPL service before, against almost 63 percent of male respondents.
Most consumers are willing to give a product a try if the seller offers a free trial before requiring payment. 84% of respondents reported they’ve engaged with a free trial offer at least once. We've highlighted some of the more popular categories.
Streaming channels/platforms and online memberships are the most popular categories for free trial offers, according to roughly 31% of respondents. Women subscribers slightly outpaced men in this category, as they did in cosmetics trials. Men were more likely to try out free trials in clothing or health supplements.
Overall, however, the numbers stayed fairly even between male and female participants, with one glaring exception: the number of men who used a free trial for software was nearly double that for women in the same category.
What’s more, the majority of respondents (82.2%) believe that “try before you buy” services provide a direct benefit to them as consumers. Free trials can be a boon to merchants as well, although there is the danger of “free trial hopping”: consumers signing up for a temporary trial period, then signing up for another free trial using a different email address, thereby perpetuating the free service.
We’ll preface this section by saying that the right to dispute credit card transactions is an important consumer protection mechanism. Chargebacks help ensure that customers are not held liable for unauthorized transactions or items they did not receive.
That said, Illegitimate chargebacks abound. Cardholders don’t always understand the process, or how to use it correctly. They may file disputes by mistake, or used to deliberately abuse the system. These disputes are known as “first-party misuse,” or more colloquially, “friendly fraud.”
The frequency with which consumers initiate chargebacks varies according to Industry. Per TSG’s AIM Analytics Platform, Transportation Services, Political Organizations, Retail Shops (General Merchandise Stores), Information Retrieval Services, and Electronics Repair Shops had some of the highest chargeback rates (as a percent of merchants’ volume) from 2020 to 2022.
Roughly 2/3 of respondents to this question said they didn’t use a banking app, but that number can be misleading: According to a recent report, 37% of people in the US don’t do banking through an app at all, either by choice or because one wasn’t available to them.
Of those who did say they have a banking app, not everyone reported using it for disputes. The majority (53. 8%) still prefer talking to a bank representative over the phone. At 40.7%, however, mobile apps were the second most popular method. And app use may soon overtake in-person handling of disputes: a considerably higher number of younger people are relying on mobile banking overall. Nearly 72% of all consumers under the age of 35 prefer the app, compared to only a quarter (24%) of those aged 55 or over.
Consumers under age 35 prefer mobile banking 3-to-1 over those aged 55 or over.
Consumers are not always the first to discover fraudulent activity on their account. As fraud instances continue to rise, banks have done more to proactively keep consumers from becoming victims.
We asked consumers how often their bank responded to possible fraud. A third of respondents reported being alerted by their bank of potential fraud at least once per month.
Overall, the data suggests that fraud detection is both commonplace among banks, and largely effective. Savvy banks have realized that taking proactive measures to prevent fraud is a highly valuable service to offer customers.
However, even if the cardholder is the first to recognize the fraud, banks get high marks for helping victims: fewer than 33% of consumers expressed being challenged by their bank when they needed to dispute a charge.
In fact, the majority (91%) of respondents said they trusted their bank to correct any fraud issues that are brought to their attention.
Once a charge was disputed with their banks, most respondents say they will see their transaction reversed on the same day or within several days.
This validates the efforts banks put into protecting their clientele. It also illustrates the trust people have in their financial institutions, which can contribute to loyalty and long-term customer value.
We also asked if, after disputing a transaction, the cardholder was shown information provided by the retailer, refuting the customer’s claim (typically forwarded by the issuer). More than half – 56.7% – of the respondents who admitted filing a dispute recalled reviewing any chargeback counterclaim documentation from their bank.
When a consumer sees an unrecognized charge on their account, their first instinct is usually to call the toll-free number on their card.
That seems logical, but an unrecognized transaction does not automatically indicate fraud. The cardholder is still required to contact the business before calling the bank. Giving the merchant an opportunity to fix the problem often resolves issues without involving the bank at all.
Following up on this idea, participants were asked about their own dispute activity over the previous year.
Unsurprisingly, the most common reason for contesting a transaction with the issuer was finding an unrecognized charge on their account. But, it’s worth noting that only one in four of respondents gave that rationale. The majority of other reasons cited revolved around perceived issues with merchants, such as difficulty processing a refund or inability to reach the merchant’s customer support.
Naturally, the categories and dollar values of disputes varied. Participants who had filed a claim with the bank over the last year reported an average dollar value of $76 per dispute. The primary categories for disputed transactions were travel & entertainment, physical goods & retail, software, digital goods (music files, games, etc.), services, and ticketing & events.
The highest percentage (60.63%) of respondents had disputed transactions in the physical goods and retail category. Digital goods – downloads of music, games, and so on – was effectively tied with both the services and travel categories at roughly 31-32%.
As we mentioned, the cardholder should always try to contact the merchant associated with the transaction before calling the bank – even if the unrecognized charge turns out to be criminal fraud. To be fair, that isn’t always an option.
For instance, it’s impossible to call the merchant if the merchant description shown on the statement is unrecognizable. Our survey showed that a majority (58%) of cardholders admit to sometimes finding card statement purchase descriptions confusing. Of that number, nearly a third reported this happens “somewhat often” or “very often.”
Nearly 1/3 of respondents admit to sometimes finding card statement purchase descriptions confusing
Confusion around billing descriptions makes it that much harder for customers to recognize valid descriptions. Mistaking unrecognized transactions for fraud often leads to unwarranted disputes
As we alluded to earlier, the majority of disputes are likely not instances of true fraud. If the cardholder is able to contact the merchant, that should always be the first step.
For more than half of respondents, their first move was to contact the bank. There are many potential reasons for this, not all of them malicious. Obviously, there is a fundamental misunderstanding among consumers of how the dispute process works; in many (if not most) cases, this lack of understanding is at the root of chargeback misuse.
Our survey showed that women tend to file more disputes than men. On average, U.S. consumers of all genders dispute 5.7 transactions per year. However, the average male respondents disputed 4.9 transactions in the last 12 months, while female respondents say they’ve disputed 6.8 transactions in the last 12 months.
Those figures can be misleading, however, due to differences in credit card use across genders. For example, men are 25% more likely than women to use a credit card for cash advances – an act that typically isn’t subject to disputes. Also, women tend to have more credit cards than men on average, which could affect the numbers. Other factors like average transaction value, shopping habits, and types of products purchased could impact these figures as well.
Male or female, innocently or maliciously, cardholders are clearly comfortable with heading straight to the bank with their transaction issues. Nearly three-quarters of participants consider disputing a charge with the issuer a “good” or “valid” alternative to requesting a merchant refund.
Nearly 3/4 of participants consider disputing a charge a valid alternative to a refund.
As we saw earlier, there are situations in which disputing a transaction is a legitimate course of action. But, as the chart to the right illustrates, cardholders may call the bank for a variety of reasons that are not necessarily valid.
While any of these statements may be true, none are legitimate cause for the cardholder to bypass contacting the merchant. Cardholders who do so without understanding the chargeback system are acting out of ignorance. This can be termed “accidental misuse” of disputes.
The blame for this misunderstanding sometimes falls on the customer. A good example is a buyer who fails to read the terms and conditions of a sale.
The retailer’s policies should be clearly outlined, easy to understand, and obviously located. If the customer doesn’t read them, however, the merchant may still be blamed and the transaction disputed.
And again, not all incidents of chargeback misuse are accidental. Some consumers fully realize that they should consult the merchant prior to filing a dispute: they just don’t do it. If they feel that dealing with the bank is faster or more convenient, that’s the route they choose.
Even worse, we’re seeing a significant increase in “cyber shoplifting.” This describes a situation in which the customer plans to file a chargeback before the purchase is even made, leveraging the system to get merchandise for free.
We asked consumers who had disputed a transaction within the last 12 months to comment on their experience with the dispute process. Based on our survey findings, more than 80% of respondents reported being “satisfied” or “very satisfied" with their experience.
This clearly shows that banks’ efforts to simplify the disputing process are working, which should incentivize issuers to continue trying to improve the system. Looking at the data, however, it’s also easy to conclude that most cardholders are winning their disputes… a fact merchants should note.
Customers’ experiences with the dispute process tended to vary somewhat depending on the card issuer involved. Among major issuers in the US, Capital One had the best consumer response, with 52.53% of Capital One customers reporting that they were “very satisfied” with the experience. Discover also received high marks, with 50.5% being very satisfied.
Over 80% of respondents reported being satisfied with their dispute experience.
But, while participants overall approved of their bank’s customer service efforts, this can be a double-edged sword for issuers. Simplifying the dispute process makes cardholders happy, but it also makes disputes more tempting. A majority of respondents (86.75%) said that, after successfully disputing a transaction, they would be more likely to try it again.
Nearly 90% say a successful dispute would make them likely to try it again.
With regard to honest customers, this demonstrates faith in the system. In instances where the dispute was actually fraudulent, however, more disputes translates to an overall increase in cyber-shoplifting.
One thing that might curtail this is the addition of fees or penalties for using the bank (instead of the retailer) to process a refund. Were that to happen, however, 35.5% of respondents felt that the retailer should be the party responsible for those chargeback-associated fees. 35% of respondents said that no fees or penalties should be applied to any party. Fewer than 10% felt cardholders should be the party responsible.
We wanted to analyze how our study reflected “real-world” scenarios. In the following examples, we asked participants whether they felt that the situation would reasonably justify a chargeback. We then compared these answers to responses given by merchants, who were asked the same questions as part of our research for the 2023 Chargeback Field Report.
In the following pages, we relate each example, then contrast the differing beliefs through our Dispute Disparity Scale™. This scale was designed to illustrate the attitudes of cardholders vs. merchants under common dispute circumstances.
All of the following scenarios could arguably be considered first-party misuse. Comparing responses from both consumers and merchants in each case indicate that there is some agreement on the appropriateness of disputes, although not to the same degree.
Providing practical context is highly relevant here, in that very few chargeback claims could be labeled 100% appropriate or inappropriate. Most disputes fall somewhere between the two extremes.
"For years, issuers perfected their dispute process to offer a seamless procedure to the cardholder. Today as more transactions are card not present, the ease with which a consumer can initiate a dispute through their issuing bank may encourage negative behavior. For many types of transactions, it is almost too easy to dispute a transaction using the issuing bank channe."
Susan Horne
TSG Senior Associate
Justin sees a transaction on his billing statement that he does not recognize. Fearing his account may have been compromised, he contacts his bank to alert them of potential fraud. How appropriate was it for Justin to dispute the charge?
If the cardholder suspects fraud, the natural instinct is to call the bank. While that may seem like the right move, immediately contacting the bank in this instance would be considered chargeback misuse. Cardholders are expected to attempt to contact the merchant and resolve the dispute before contacting the bank. Merchants as a whole seemed to understand this more clearly than cardholders: although most agreed the dispute would be valid, their interpretation of the situation was likely more nuanced.
Christy purchases an outfit online. The estimated shipping is 7 business days, but after two weeks, the item still has not arrived. She has not received any communication from the seller. She tries to inquire about her purchase but gives up after being left on hold for 10 minutes. Frustrated, she contacts her bank. How appropriate was it for Christy to dispute the charge with her bank?
It’s interesting that more consumers didn’t believe the scenario warranted a chargeback. After all, she had a legitimate concern, and while unable to contact the merchant, she did at least try. In truth, a late order does not warrant a chargeback. At the same, merchants have a responsibility to be available to customer service questions. The close alignment between the group responses could be explained by the mutual understanding of the potential for extenuating circumstances on either side.
George receives a physical product in the mail and is unhappy with the quality. The photos online are clearly misleading. He tries to return the product, but the seller requires that he pay for the return shipping himself. He decides to contact his bank to try and avoid the expense. How appropriate was it for George to dispute the charge with his bank?
Neither party is fully to blame here. Trying to avoid a return fee does not warrant a dispute, but merchants should be held accountable for incorrect details that result in a sale. The small disparity of the two groups could indicate that both sides are able to look at the situation from both perspectives.
Andrew sees an offer to try a new product for free. He enters his credit card to pay for shipping without realizing he is also agreeing to be billed automatically. The terms were technically listed on the checkout page, but they were small and located at the very bottom. Andrew feels duped and angrily calls his bank. How appropriate was it for Andrew to dispute the transaction?
Here again, blame could clearly extend to both parties. The retailer is responsible for ensuring that subscribers understand what they’re signing up for. That said, cardholders should perform their due diligence before subscribing. The disparity between the two groups here could reflect the idea that cardholders are more apt to see the purchaser as the victim in these situations.
Nick wants to cancel a membership, but the merchant requires him to call during business hours. He is very busy during the day and so the membership renews. Frustrated, he challenges the transaction in his banking app. How appropriate was it for Nick to dispute the charge with his bank?
It could be argued that most people consider themselves very busy, but that doesn’t relieve the merchant of the responsibility of customer service. Nevertheless, the number of cardholders calling the dispute valid is lower than we’ve seen in previous examples. The number of disapproving merchants is even lower, possibly indicating that merchants see non-standard customer service hours as being less important than consumers do.
Sarah lets her young child play games unsupervised on her phone. Her kid spends almost $100 on in-game purchases. She contacts her bank and says she did not authorize the charges. She does not mention her child. How appropriate was it for Sarah to dispute the charge?
Of our examples, this one had the highest disparity between customers and merchants. Clearly, cardholders felt the situation validated a dispute, probably rationalizing that the child didn’t have express permission to make purchases. Far fewer merchants held that opinion, the implication being that by not policing her child’s actions, Sarah passively authorized the purchases (and is therefore responsible).
David buys an NFT from a website. After doing some research, he begins to regret his purchase. Unfortunately, his NFT is worth much less than it was when he bought it. Feeling misled, he contacts his bank. How appropriate was it for David to dispute the transaction?
While his loss is unfortunate, comparatively few customers were on David’s side. Only a small number of merchant respondents felt the chargeback was justified. The phrase caveat emptor could apply here: both groups seem to imply that the buyer was responsible for performing due diligence before making the purchase. His buyer’s remorse does not make the original transaction invalid.
Vicky orders some expensive sunglasses online. The large purchase overdraws her account. Faced with bills and a negative balance, she panics and tells her bank that her card was recently stolen. How appropriate was it for Vicky to dispute the charge?
Almost no merchants believed Vicky had the right to dispute purchases, as her claim was based entirely on a lie. More (although still few) cardholders felt her actions were justified, but there is really no legitimate cause for that belief. The easiest conclusion to draw here is that cardholders may have felt sympathy for the buyer’s situation, and offered unjustifiable support. Merchants were clearly not willing to do that.
Consumers are still primarily using credit cards for online purchases. Alternative methods of payments are gaining ground, though, including peer-to-peer payments and installment plans. Digital wallets are showing the most growth, but the method is still ultimately tied to credit cards.
This preference for payment cards increases based on user age, with respondents over the age of 45 nearly three times more likely to favor credit cards over mobile payments, compared to participants under 45.
This means that in order to appeal to younger consumers, businesses must adapt their business models to meet new demands. Subscription business models, for example, work well for merchants, but our study shows that customers appreciate them, too.
That said, we see a different story when it comes to canceling unwanted subscriptions. In those instances, subscribers are more likely to skip the merchant and call the bank. In fact, nearly 90% of respondents wanted their banks to be able to cancel a service on the subscriber’s behalf.
In other areas, consumers reported being overall content with their banks. Most said they trusted their banks to alert them to potential fraud, while 91% said they trusted their bank to correct any fraud issues brought to their attention.
The problem is that, cardholders are using their banks to dispute charges in more situations than they really should be. In some cases, this is because they don’t understand the way the system is supposed to work.
While chargebacks were only intended for cases of fraud or merchant abuse, a large portion of consumers are okay disputing for any number of reasons, such as not recognizing the merchant’s billing description, or finding the merchant’s return process confusing. Whatever the reason, more than half of respondents admit to filing a dispute without contacting the merchant first.
Chargebacks – legitimate or otherwise – were filed across all verticals, with some naturally more susceptible than others. The highest percentage (60.63%) of respondents had disputed transactions in the physical goods and retail category. However, transactions for digital goods, services, and travel were generally more susceptible to disputes than retail purchases.
These costs largely fall on the shoulders of merchants. In the US, losses from payment card fraud totaled an estimated $12.16 billion in 2022. Based on our internal research, the current cost of a single chargeback is roughly $190.
Possibly the worst aspect of this is that success leads to repeat offenses. A majority of respondents (86.75%) said that after successfully disputing a transaction, they would be more likely to try it again. Clearly, it is not a situation merchants can afford to ignore.
Going forward, more work needs to be done to raise consumer awareness on the proper use of disputes and chargebacks. Merchants also need to closely examine the impact payment card fraud of all types is having on their business, and implement comprehensive strategies to manage chargebacks.
"To help the merchant and issuer combat first party fraud, the card brands have recently established rules for compelling evidence to help the issuing bank recognize genuine transactions and deter fraudulent or inaccurate disputes. Compelling evidence provided by the merchant offers insight into the cardholders purchase history, delivery information and geographic location as related to the merchant. The benefit of applying compelling evidence to the dispute process should help deter first party fraud disputes and decrease overall disputes by a measurable degree."
Susan Horne
TSG Senior Associate
At Chargebacks911, we can assist you with all aspects of chargeback management. From automated chargeback responses that mitigate the overall risk of illegitimate chargebacks, to helping recover more revenue from chargeback fraud, Cb911 offers the most comprehensive, end- to-end chargeback management available. Plus, all our services are backed by the industry’s only performance-based ROI guarantee. If you have questions concerning prevention, representment, or any other chargeback management issue, contact us today.
