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."
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.