Chargeback ReasonsHere's Why Your Customer Just Filed That Chargeback

November 14, 2022 | 12 min read

Chargeback Reasons

In a Nutshell

Most merchants are well aware that not every chargeback reason is a legitimate one. Read on to discover the trouble with chargebacks, their underlying causes, and the top 10 reasons customers file them. We’ll also throw in a few best practices for merchants to avoid them in the first place.

The Top 10 Chargeback Reasons: Why Do Cardholders File Disputes in the First Place?

A chargeback can occur when a cardholder disputes a payment card transaction and asks their card-issuing bank to reverse it. It’s an important consumer protection mechanism for credit and debit card transactions

Chargebacks guarantee that a cardholder can retrieve funds lost to fraudsters, identity thieves, or other unauthorized uses of their account. Chargebacks also incentivize merchants to be on their best behavior. 

All that aside, disputes can happen for a variety of reasons, and chargebacks are not always filed for the right reasons.

Consequences of Chargebacks for Merchants & Cardholders

Chargebacks can be a serious loss source for merchants. Not only does seller lose the funds from a legitimate sale, but they are also on the hook for chargeback fees, fulfillment and shipping costs, and also the cost of any materials.

Merchants aren’t the only ones who suffer for illegitimately filed chargebacks, though. Like we alluded to above, chargebacks sometimes get filed without a valid reason. Consumers who leverage their right to a chargeback without legitimate cause may find themselves in trouble.

If the merchant is able to prove that the original transaction was legitimate (a process called representment), the cardholder will lose their provisional refund. The buyer will also be responsible for bank fees and penalties. Additionally, disputes can take months to finalize, leaving both the cardholder and the merchant in limbo.

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So all that being said, we have to ask: why do chargebacks even happen in the first place? What triggers a chargeback, and what can be done to prevent them from being necessary?

Let’s try to answer those questions by taking a closer look at the ten most common reasons for disputes.

The Top 10 Reasons Why Cardholders File Chargebacks

The chargeback triggers outlined below are pretty diverse.

Sometimes, the merchant really is at fault, and the customer deserves their money back. For example, maybe the merchant’s refund policy was unclear, or no one from their organization got back to the buyer in a reasonable amount of time. These could be considered valid reasons to dispute a charge.

In other cases, a customer may simply forget about a payment due date, or didn’t recognize the merchant’s billing details on their statement. In these situations, while miscommunication may be understandable, it doesn’t warrant a chargeback. In other instances, a cardholder could file an illegitimate dispute on purpose because they are angry, confused, or simply looking to get something for free. 

Regardless of fault, knowing why a chargeback was filed and how to respond can be the key to a lower chargeback ratio, as well as lower fees and fewer account restrictions. To illustrate this, we’ll go over many of these reasons and provide some advice for merchants about how to mitigate losses with a few best practices.

Merchant didn't provide goods/services in a timely fashion

Regardless of circumstance, if a customer orders something that takes an unreasonable amount of time to arrive (typically, anything outside of 10 days needs to be explained in a merchant’s terms of service), they may file a dispute saying they never received the item. This is true even if it eventually arrives.

The goods were damaged, defective, or missing parts

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.

The cardholder was charged an incorrect amount

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.

The buyer used stolen cardholder information

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, including the EMV Liability Shift, merchants may see more card-not-present fraud than ever, and be held financially responsible for all acts of fraud that originate with their business.

The customer regrets their purchase

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 prime case 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.

The cardholder’s family member made the purchase

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.

Bad affiliate traffic

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 mutually beneficial to businesses, it’s absolutely essential that these potential partnerships are vetted extensively.

The buyer wants to end a subscription

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, but generally speaking, people either 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.

The product description was inaccurate

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 and constitute a case of friendly fraud, assuming that the buyer didn’t first try to return the goods through the proper channels.

The buyer is trying to get something for free

We wanted to throw this one in, as it's another fast-growing threat that should be very alarming for merchants. 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.

3 Basic Reasons for Chargebacks

Those are just a few of literally dozens of potential chargeback reasons. That said, we should also discuss their root causes. Generally speaking, we can divide all dispute reasons into one of three main categories:

Merchant Error

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.

Criminal Fraud

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.

Friendly Fraud

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.

Baseline chargeback reasons will always fall somewhere between these extremes. Chargeback reason codes are supposed to help explain the cause of a chargeback. Unfortunately, they aren’t  reliable enough or detailed enough to provide much valuable insight as to reasons for chargebacks.

Most Chargeback Reasons Fall in a “Gray Area”

As you might have guessed, there are some “gray areas” implicit in the dispute process that are not adequately accounted for by the convention industry understanding of chargeback reasons. For instance, there are no “friendly fraud” reason codes, because friendly fraud is predicated on hiding behind a false chargeback reason code.

Overreliance on reason codes is possibly the single most common chargeback management error. This is because most non-fraud chargebacks are not clear-cut cases of either criminal fraud, merchant error, or cardholder abuse. Rather, disputes tend to  lie between these categories.

Consider this example: imagine a company sells a shirt online. The picture on their website shows the shirt in a soft salmon color, but the shirt is actually closer to orange. The merchant has some culpability here, but disputing the charge is an improper response.

This makes matters very complicated for merchants. Extreme cases of fraud can be addressed or prevented, but those chargebacks in the middle typically do not have such clear-cut solutions. In most cases, disputes should be fought and overturned. However, there may also be things that a merchant can do to prevent disputes with similar stated chargeback reasons from occurring in the future.

Best Practices Can Help Prevent Chargebacks

Regardless of the reason for a chargeback, the simplest way to avoid problems is to deploy best practices to keep chargebacks from happening in the first place. Below are a few steps merchants can take to avoid customer disputes that result in chargebacks:

Clear Up Billing Errors

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

Simplify Returns

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

Provide 24/7 Customer Support

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.

Keep Customers Informed

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.

Send Billing Alerts

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

Whether or not a merchant already utilizes many or all of these best practices, they could still find themselves at the mercy of fraud and chargebacks. Disputes are a complex issue. They don’t have a “one-size-fits-all” solution, and what works for some merchants may not work for others. 

This is why it’s imperative to not only have a fraud and chargeback prevention plan in place, but also to diversify those options as much as possible. 

A Multi-Layered Strategy is Essential

Chargebacks have their place in commerce, and they aren’t going anywhere anytime soon. That said, the need for comprehensive fraud prevention isn’t going anywhere either.

What should merchants do to stay ahead of the curve? A multi-layered approach to fraud and chargebacks could be the best answer.

With the industry’s first and only full-service chargeback management solution, Chargebacks911 can help you prevent chargebacks, recover revenue, and grow your business. Contact us today to learn about our no-obligation ROI analysis.


What is a chargeback?

A chargeback is a credit or debit card charge that is forcibly reversed by an issuing bank. This typically happens after a cardholder claims a transaction was the result of fraud or abuse.

What are the three sources of chargebacks?

Generally speaking, all dispute reasons stem from one or a combination of three main sources: merchant error, criminal fraud, or friendly fraud.

What are common reasons for chargebacks?

There are literally dozens of potential chargeback sources. Some of the most common reasons for chargebacks include items arriving damaged or defective, merchants not providing the goods or services in a timely fashion, buyer’s remorse, and criminal fraud.

Are chargeback reason codes accurate?

No. Chargeback “gray areas” implicit in the dispute process are not adequately accounted for by current chargeback reason codes. Overreliance on reason codes is possibly the most common chargeback management error. This is because most non-fraud chargebacks are not clear-cut cases of either criminal fraud or cardholder abuse, but rather oscillate somewhere between the two.

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