Chargeback Reasons25 Common (& Not-So-Common) Reasons Why You Might Be Dealing With Chargebacks

If a customer orders something that takes an unreasonable amount of time to arrive, they may file a dispute saying they never received the item. This is true even if it eventually arrives. Typically, anything outside of 10 days needs to be explained in a merchant’s terms of service, or else the merchant is at serious risk of a chargeback.

This covers any situation in which a customer receives products that arrived damaged, were missing parts, or did not include something they believed would be included.

Merchants might assume they would receive a call or email regarding the issue. In reality, though, many consumers believe it will be more convenient to bypass the merchant and let the bank handle the issue.

This happens a lot where manual data entry is required to process orders; accepting orders over the phone, for instance. However, it can also happen as a simple mistake if a shop is particularly busy. A simple slip of the finger can be a common problem.

This is outright criminal fraud. Cardholders are legally protected from the impacts of card fraud. Merchants won’t be protected, though. Due to several factors, card-not-present merchants are likely to see more fraud than brick-and-mortar sellers. They will be held financially responsible for all acts of fraud that originate with their business.

When a cardholder makes a purchase, but regrets it later, they may file a chargeback to recoup their money. A chargeback filed due to buyer’s remorse is a textbook example of friendly fraud; a situation where a customer side-steps a return policy in order to gain an illegitimate refund.

Some customers do this when they know they don’t have a good excuse for a refund and are worried that their return request may be denied.

This is a practice called family fraud. Many consumers fail to understand that members of their household are considered legitimate account users unless otherwise specified in advance of the purchase.

For example, a cardholder’s child using the parent’s account to purchase movies or video games online. Banks and payment processors don’t recognize these purchases as unauthorized, but the buyer may not be aware of this rule at all.

There are several ways for scammers to leverage affiliate marketing to take advantage of merchants. Click spam, cookie stuffing, and URL hijacking are just a few examples. While affiliate marketing can be beneficial, it’s essential that these partnerships are vetted extensively.

Subscription services are considered a high-risk business practice. This is because the business model tends to foster a high number of disputed charges. The reasons for this vary; people may forget about the subscription, make a mistake, or just want out of the agreement. The buyer then sees the chargeback process as an “easy out,” rather than canceling service through the proper channels.

Many buyers will make a purchase, only to file a dispute claiming the item they ordered didn’t meet their expectations. Rather than call the merchant to arrange an exchange or refund, the cardholder goes straight to their bank to dispute the charge.

Why? Sometimes it’s something as innocuous as an unexpected sizing issue, or the color didn’t quite match the pictures online. In any case, these chargebacks are illegitimate if the buyer didn’t try to return the goods through the proper channels first.

A growing number of chargebacks happen because consumers ignore return policies, refuse to wait for refunds, or simply want to get something for free. This is a situation known as cyber shoplifting, and is an increasingly common practice for cardholders. Unscrupulous buyers have learned that they can abuse the chargeback process by making purchases and simply disputing them later.

The authorization process occurs when a cardholder presents their card information to the merchant after making a purchase. The merchant’s acquiring bank receives the transaction information and requests authorization from the issuing bank.

Sometimes, this otherwise standard process does not occur as expected. Banks can refuse to authorize a transaction if a card has expired, or if the purchase causes the cardholder to exceed their credit limit. Technical glitches may also lead to invalid authorizations. Chargebacks will result if a merchant tries to run a sale without authorization.

This occurs where a merchant receives a decline code when processing a transaction and retries the procedure. Unbeknownst to the merchant, however, the first charge was approved, meaning the transaction has now been submitted twice.

Cardholders will usually find that requesting a refund for the erroneous charge directly from the merchant is faster and preferable to filing a dispute. That said, the cardholder may file a chargeback against one (or both) of the transactions anyway upon noticing the double charge.

Some businesses are crowded, but short-staffed. When this happens, a merchant may find it difficult to serve customers and process payments at the same time. If the backlog is severe, an approved payment authorization may expire before the merchant has a chance to batch and submit a transaction for processing.

System glitches, internet outages, and other downtime incidents can also result in prolonged delays, which can similarly lead to expired authorizations.

Missteps on the merchant’s part that inadvertently trigger chargebacks. This covers data entry errors, fulfillment errors, or shipping and handling errors, as well as customer service gaffs and other fixable issues.

Deliberate acts by outside parties to steal from consumers or merchants. Neither the cardholder nor the merchant is responsible for acts of criminal fraud, but merchants are generally held liable when this happens.

This is any consumer claim that is — intentionally or unintentionally — fraudulent. For example, filing a chargeback due to buyer’s remorse, or simply because the buyer misunderstood the merchant’s policies. Both of these would be examples of friendly fraud.

Prominently displaying information like email address, website, and phone number encourages customers to reach out to merchants, not their banks.

Including no-hassle returns, extended refund deadlines, postage-paid returns, and so on, can drastically improve customer relations and satisfaction.

Banks have made dispute forms available to customers online, 24 hours a day. Merchants should do the same to avoid missing the chance to resolve a dispute in advance of a chargeback.

Always alert customers when goods have been shipped. Alos, provide notifications, as well as a cancellation option, if they have been back-ordered or delayed.

Customers should be notified before a recurring transaction is processed, especially with a subscription or a negative-option arrangement.