Subscription Chargeback DataHitting “Unsubscribe” on Subscription Chargebacks

New Research on the Subscription Chargeback Problem: Why Pre-Charge Reminders Are Non-Negotiable

Merchants with recurring revenue streams benefit from dependable cash flows and sticky customers. They also typically have an easier time qualifying for debt or equity financing and receive higher valuations at exit. There is one often overlooked downside to subscription revenue, however: the threat posed by chargebacks.

Once a consumer puts a card on file, subsequent recurring charges may be easy to forget. Cardholders may mistake legitimate subscription charges for fraudulent activities and file invalid disputes against subscription purchases they don’t remember authorizing.

A cardholder who subscribes to a monthly service for three years will be charged 36 times. Just one disputed charge could be enough to drag a customer’s lifetime value into the red. So, imagine the potential ramifications when a cardholder has 36 opportunities.

Why Subscription Sellers Carry Elevated Chargeback Risk

As was mentioned above, recurring charges provide ongoing opportunities for well-meaning buyers to forget what they purchased. There are a few other complicating factors here, too:

No matter the circumstances that lead to a dispute, each chargeback means punishing consequences for merchants. There’s lost sales revenue and lost inventory (or lost service delivery costs) to account for. Then there are chargeback fees; these fees are assessed by acquirers to recoup administrative costs. They range from $15 to $100 a dispute, and are often non-refundable even if a merchant ultimately wins a dispute.

According to data published by LexisNexis Risk Solutions, the average US merchant will lose $5.13 for every dollar disputed. This means merchants may have to make several successful sales to break even on just one disputed transaction. And, if a business experiences too many chargebacks, they may find their bank account frozen or even canceled.

Merchants are Not Taking the Threat Posed by Subscription Chargebacks Seriously

Our merchant survey data reveals that, while merchants are largely aware that subscriptions elevate chargeback risk, only some work to mitigate it. 32% of respondents identify subscription billing as their primary source of chargeback risk, making it the most frequently reported chargeback risk factor.

Chargeback Risk FactorsPrimary sources of chargeback risk identified by respondents

Source: 2026 Chargeback Merchant Survey, “Which of the following chargeback risk factors apply to your business?”

Many invalid chargebacks are filed by forgetful cardholders that misidentify recurring charges as unauthorized activity. Simply notifying customers of recurring charges through pre-charge communications, whether by text or email, can help substantially reduce the risk of chargebacks. Pre-charge reminders provide a heads-up to cardholders before they are charged, which gives them a chance to change, adjust, or cancel their subscription in the current billing cycle. Despite this, survey data from the report shows that only 53% of merchants surveyed say they remind their customers about upcoming charges ahead of time.

Subscription RemindersHow merchants handle reminders

Source: 2026 Merchant Survey, "When do you notify customers about recurring subscription charges?"

26% of respondents do not always send subscription reminders. Another 17% of respondents say they only send post-charge reminders. Put another way: nearly half of respondents are either neglecting billing reminders altogether, or are implementing them in a less-than-optimal manner.

Making Subscription Management More Customer-Friendly Can Help Stop Chargebacks

There is no “silver bullet” here to reliably prevent subscription chargebacks. That said, proactive pre-charge reminders can address a large swath of invalid disputes that occur due to forgetfulness or ignorance.

We recommend that merchants consider the following best practices to help reduce the threat posed by subscription chargebacks:

According to our survey data, barely half (54%) of merchants are certain about how their descriptor appears when it shows up on a customer’s billing statement. This is a problem; unclear billing descriptors are identified as one of the leading causes of invalid chargebacks. In fact, 40% of consumers surveyed as part of the 2025 Cardholder Dispute Index say they are often unable to recognize purchases on their billing statements because of confusing or incomplete billing descriptors.

Source: 2026 Merchant Survey, “Do you know exactly how your billing descriptor appears on customers’ statements?”

Obscure or unclear statement descriptors may keep buyers from recognizing legitimate purchases. Clear, easy-to-understand descriptors, on the other hand, help cardholders to remember when, where, and what was purchased, even long after the transaction is settled.

A successful pre-charge notification fulfills two functions. First, it should remind a customer that they are an active subscriber. Second, it should inform a cardholder about an imminent upcoming charge.

A sequence of pre-charge reminders is almost always better than one. While a single email can easily fall through the cracks, a well-timed chain of reminders sent at staggered intervals (e.g. one month, one week, three days, and one day) before the billing date can better ensure that a cardholder is both informed of, and prepared to incur, the upcoming charge.

Plans should not lock cardholders into inevitable charges. It might seem a little counterintuitive, but reminders should provide customers with an easy off-ramp in the form of a lax, pro-buyer cancellation policy. In practice, this means including a clear and conspicuous option to cancel in the body of every pre-charge billing reminder.

Some merchants may understandably balk at this suggestion. Why go out of my way to elevate churn? But, the fact of the matter is that customers who are unable to cancel a subscription they no longer want are more likely than not to turn to chargebacks to unwind their forced purchases. In other words, it’s possible that merchants who allow cancellation procedures to be vague or difficult to navigate could ultimately see less revenue in the long run.

Post-charge confirmations alone are ineffective because they don’t give customers an ability to modify their subscription before they are billed. But, combining post-charge messages with pre-charge notification, including a clear and simple path to modify one’s subscription plan, is a wise move. This lets merchants remind cardholders before they are billed, then reassure them after the fact that they were charged the correct amount by the right merchant.

Post-charge confirmations can also help merchants leave a stronger paper trail of evidence if a cardholder falsely alleges they were billed incorrectly. And, when errors do occur, post-charge alerts allow cardholders and merchants to rectify things more quickly.

Refunds and cancellations are not ideal. But, they are both preferable to a chargeback. So, one way merchants can prevent chargebacks is to make sure it is easier and faster for a customer to receive a refund than to file a dispute.

This is a high bar to clear, given how straightforward chargebacks are for cardholders to file. That said, a combination of responsive customer service and buyer-friendly return policies can help merchants build trust and encourage cardholders to reach out directly. The aim should be to project the notion that working with the merchant will always be faster and easier than looping the bank into the conversation.

Take the Next Step to Stop Subscription Chargebacks

Pairing billing reminders with end-to-end chargeback management tools, like the fully customizable software solutions offered by Chargebacks911®, can help businesses protect recurring revenue and prevent friendly fraud. But, it’s not just subscription sellers who can benefit.

Businesses supporting “buy now, pay later” financing options, merchants operating in high-risk verticals, and card-not-present eCommerce vendors at large can all benefit from a performance-based dispute management platform that’s backed by an industry-leading ROI guarantee. Have lingering questions? Get in touch with a Chargebacks911® expert for a no-obligation ROI analysis today.

This whitepaper examines the importance of pre-charge reminders and other chargeback prevention best practices for subscription merchants using data compiled for the 2026 Chargeback Field Report. Eager to get a bigger-picture grasp on the state of chargeback management in 2026? Download the report today.