How to Handle Chargebacks

September 9, 2021 | 9 min read

How to Handle Chargebacks

Learn How to Handle Chargebacks in 4 Easy Steps

Handling chargebacks on your own can seem overwhelming. This growing threat can be one of the biggest challenges you face as a card-not-present merchant. Regardless whether they’re legitimate or fraudulent, chargebacks drain your revenue, tie up valuable resources, and threaten the longevity of your business.

Even so, most merchants treat chargebacks as an unavoidable cost of doing business. Nearly half of all merchants, in fact, believe customer disputes are inevitable. That kind of attitude makes it seem that dealing with chargeback management is hard…or not even worth the effort.

In reality, handling chargebacks is doable if you first break it down into 4 manageable steps. Let’s take a look at each step in a little more depth.

Step 1: Identify the Source

Look below the surface. You’ll see that all chargebacks ultimately stem from one of three causes: merchant error, criminal fraud, or friendly fraud.

You cannot effectively fight chargebacks until you identify which of these three things is actually responsible. That’s not as simple as it sounds, though.

When a cardholder files a chargeback, the issuer attaches a reason code to the transaction. In theory, the reason code explains why the bank reversed the transaction. Unfortunately, a variety of factors—including the rapid growth of eCommerce and online fraud—rendered the reason code system unreliable. It can show you the given reason for a customer dispute, but that may have nothing to do with the real reason the claim was filed.

You Can’t Handle Chargebacks Until You Know the Source.

Trust the experts who can take chargebacks off your plate. Click to learn more.


To contest a dispute, you must refer to the reason given by the cardholder. However, almost any reason code can be a façade that covers up friendly fraud. In response, you need to look beyond reason codes to identify the real cause behind the claim.

Chargebacks911® developed its proprietary Intelligent Source Detection technology to specifically pinpoint the precise root of your chargebacks. Through a fusion of proprietary software and expert human forensics, ISD is the only tool available that can reveal the true source of customer disputes.

Without this information, you won’t know how to handle chargebacks when they occur. Thus, your chargeback management strategy will not yield positive results. However, once you’ve identified the culprit as merchant error, criminal fraud, or friendly fraud, it’s possible to start planning a workable solution for handling chargebacks.

Step 2: Prevent Future Chargebacks

You can fight friendly fraud chargebacks through representment (more on that in a minute). However, you can’t challenge chargebacks resulting from genuine merchant error or criminal fraud.

A merchant error is, of course, your responsibility. You made a misstep somewhere, which resulted in a chargeback. Criminal fraud, on the other hand, may not be your fault, but it isn’t the customer’s fault, either. With criminal incidents, the responsibility for the swindled service or merchandise falls to you, because you were tasked by the bank with ensuring that the customer was a legitimate card user.

Just because you can’t contest these disputes, however, doesn’t mean you’re helpless. There are steps you can take to prevent those chargebacks from happening in the future.

Criminal Fraud

Criminal Fraud

The best way to handle chargebacks resulting from criminal fraud is to prevent it from happening at all. This requires a customized prevention strategy that incorporates proven tools such as fraud filters, card network verification tools, and internal manual review processes.

The experts at Chargebacks911 can also show you how to deal with chargebacks through automated network solutions such as Visa Order Insight and Mastercard’s Consumer Clarity. Both of these products allow you to respond to issuers in real-time with additional information, avoiding chargebacks that would be labeled as criminal fraud.

Also note that criminal fraud—while a serious issue—is not the main problem most merchants actually need to address. Take care to ensure that the solutions you deploy do not cost more in false declines than they save by preventing chargebacks.

Merchant Error

Merchant Error

As a merchant, it’s natural to assume the fault for chargebacks lies elsewhere. Despite that fact, though, much of your revenue loss may be traced to seemingly minor missteps in your policies and procedures:
  • An omission of action: You fail to obtain authorization, don’t issue credit immediately, omit fees, or ignore cancellation requests.
  • Inaccurate merchant activity: You incorrectly enter account information on mail/telephone orders, process a transaction multiple times, or charge the card prior to order shipment.
  • Passive inaccuracies: Unclear shipping or return policies, outdated product photos or descriptions, or negligent customer service.

To stop chargeback losses, you must locate all procedural errors, outline necessary changes, and implement targeted prevention strategies. This is a struggle for most merchants, but professional assistance from chargeback experts can be a great help.

The Chargebacks911 Merchant Compliance Review was specifically designed to help detect, identify, and eliminate missteps that commonly lead to transaction disputes. This detailed inspection carefully scrutinizes over 100 separate points in your policies and procedures, delivering a comprehensive, actionable report. We can then help you create and implement a custom strategy for how to handle chargebacks resulting from merchant error.

Step 3: Engage in Tactical Representment

Managing chargebacks is about more than prevention.

According to our data, friendly fraud will account for roughly 60% of all chargebacks by 2023. While it may seem disheartening that so many disputes are nothing more than dishonesty on the part of cardholders, the situation isn’t as bad as it seems. While you can’t contest chargebacks resulting from merchant error and criminal activity, you can beat disputes stemming from friendly fraud.

Fighting friendly fraud yields multiple positive benefits:

  • It improves your standing with banks, potentially leading them to perform more due diligence in judging future disputes.
  • It recovers revenue that would have otherwise been lost.
  • It discourages cardholders from committing friendly fraud in the future (as many as 40% of cardholders who commit friendly fraud will do it again within 90 days).

Contesting chargebacks, however, requires a substantial investment in resources. Each time you challenge a claim, you will need to create an entire rebuttal package that includes a claim-specific rebuttal letter, along with compelling evidence demonstrating that you upheld your end of the transaction.

A few automated representment services are available, but they are ineffective. They produce generic, incomplete, lackluster rebuttals, which in some instances can actually damage your reputation.

To recover more revenue, you need a professional approach. Tactical Chargeback Representment services from Chargebacks911 involve humans employing their expertise to create dynamic cases that deliver the highest ROI.

Step 4: Get a Long-Term, Professional Partner

It’s natural to think that in-house management would be the best way to handle chargebacks. After all, who knows more about your business than you do?

Actually…that’s exactly the problem.

Being an expert on your business doesn’t mean you’re an expert at knowing how to handle chargebacks. In-house dispute management and prevention is actually very inefficient. You’ll need to keep close watch on all transactions, invest time and energy into fighting invalid chargebacks, and stay on top of new fraud threats and ongoing changes in regulations.

Even worse, statistics show that DIY representments have a shockingly low success rate. In other words, handling chargebacks requires a lot of investment…but ROI is rarely—if ever—achieved.

In-house teams do not have the expertise or the resources to effectively manage chargeback losses. Your energies are better focused on serving your customers and growing your business.

A True, Professional Partner

At Chargebacks911, our years of experience have taught us how to handle chargebacks. We offer the most comprehensive, custom-tailored chargeback management solutions available. Experience-based strategies, industry-defining technologies, and end-to-end transparency combine to make Chargebacks911 a true professional partner for merchants serious about dealing with chargebacks.

Ready to start saving with our data-driven technology platform? Contact us today for a no-obligation demonstration.


How do merchants handle chargebacks?

Effectively handling chargebacks is best accomplished by breaking the process into 4 steps. First, identify the true source of disputes. Next, take steps to prevent chargebacks caused by criminals and merchant errors, then relentlessly contest all friendly fraud chargebacks. Finally, partner with professional chargeback experts who are able to combat disputes at every stage of the process.

How can I identify where my chargebacks really come from?

Most merchants can’t, and therefore lean heavily on unreliable reason codes. That’s why Chargebacks911 developed their exclusive Intelligent Source Detection, the only technology capable of detecting the true source behind every customer dispute.

How do you protect yourself against a chargeback?

Handling chargebacks calls for a multilayer solution. You need to identify chargebacks by their source (criminal fraud, friendly fraud, or merchant error), then deploy solutions specifically targeted at those triggers.

Can my in-house team succeed in handling chargebacks?

Do-it-yourself chargeback efforts may be capable of identifying a few merchant errors and handling some of the most obvious friendly fraud cases—the low-hanging fruit, as it were. For effective chargeback management and the highest ROI, you’re better off partnering with chargeback professionals capable of taking customer disputes completely off your plate.

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