Chargeback Reasons – Typical Reasons They Occur

If you’re a merchant and you’re suspicious of whether or not a chargeback is legitimate or not, you’re not alone. We created the ultimate list for why most chargebacks occur after having over ten years of experience in the space.

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40 Reasons Why Chargebacks Occur In 2024

A chargeback occurs when a cardholder challenges a payment, requesting their card-issuing bank to reverse the transaction. It serves as a vital consumer protection feature, ensuring security in both credit and debit card purchases.

Chargebacks provide cardholders with a way to recover funds lost to fraud, identity theft, or unauthorized transactions. They also motivate merchants to maintain high standards of service and integrity.

However, not all disputes are justified. Chargebacks can be initiated for a range of reasons, and many times they may not be filed for legitimate concerns.

Fraudulent Transactions

Chargebacks often arise when a cardholder’s information is stolen and used without their knowledge. In such cases, the cardholder may not recognize the transaction until they see it on their statement. This type of chargeback is among the most prevalent, as consumers look to recover money lost to unauthorized purchases.

Non-Receipt of Goods

A common reason for chargebacks is when the customer does not receive the goods they purchased. This may occur due to shipping delays, mistakes, or lost packages. In these situations, buyers typically dispute the charge, especially if they cannot communicate effectively with the merchant or get an update on their order.

Damaged or Defective Goods

If the items delivered are faulty or broken, buyers might skip the return process and opt for a chargeback instead. Some customers find chargebacks to be a more efficient way to deal with product issues, particularly if they think the return process will be lengthy or inconvenient.

Product Not as Advertised

When a product differs significantly from how it was described, customers may file a chargeback. This can involve differences in aspects like size, color, functionality, or overall quality. A chargeback is often the chosen recourse when a buyer feels the merchant misrepresented the product in any way.

Billing Errors

Chargebacks can be initiated if the customer is charged an incorrect amount. This might result from a mistake in the billing system or a clerical error. Cardholders frequently dispute transactions when there is a mismatch between the expected charge and the final amount billed.

Duplicate Charges

If a buyer is charged twice for the same purchase, a chargeback is often their response. Although these errors can usually be resolved with the merchant, many customers prefer to file a dispute through their bank to expedite the resolution.

Unauthorized Transactions

Occasionally, a family member or acquaintance might use a cardholder’s account without permission. While the transaction isn’t necessarily fraudulent, the cardholder may still file a chargeback if they weren’t aware of the purchase and did not approve it.

Subscription Conflicts

Subscription-based businesses are particularly vulnerable to chargebacks when customers forget to cancel or are billed after they think the service has ended. Instead of resolving the matter with the company, many users opt to dispute the charge as a way to stop further payments and recover the cost.

Unissued Refund

When a merchant promises to issue a refund but fails to follow through, the cardholder may escalate the situation by filing a chargeback. Delays or mistakes in processing a refund can lead to frustration, prompting the buyer to seek resolution through their bank.

Services Not Provided

Cardholders might dispute charges for services that were never delivered. This can happen in industries that provide professional services, such as event planning or repairs. If a customer feels that the promised service wasn’t provided, they are likely to reverse the payment via a chargeback.

Confusing Merchant Policies

If the return, refund, or exchange policies are not clearly communicated by a merchant, buyers may resort to filing chargebacks. When customers struggle to understand or locate important policy details, it can lead to frustration and disputes, even if the merchant isn’t at fault.

Fake or Counterfeit Goods

Chargebacks are often filed when buyers receive counterfeit products. This is especially prevalent in online transactions where it’s hard to verify the authenticity of an item beforehand. Once customers realize they have been deceived, they frequently bypass the merchant and dispute the charge with their bank.

Misleading Product Information

If a product doesn’t live up to the claims made in its description, the customer may seek a chargeback. For instance, if a buyer is expecting a high-quality item based on the provided information but receives something subpar, they’re likely to dispute the transaction to get their money back.

Missing Store Credit

If a cardholder returns an item and the merchant agrees to issue store credit but fails to process it, this can result in a chargeback. Unfulfilled promises of store credit can leave customers dissatisfied, leading them to dispute the original transaction to recover their funds.

Poor Customer Support

Sometimes, customers file chargebacks simply because they are unhappy with the customer service they received. If they feel their concerns aren’t being addressed or they are unable to get in touch with the merchant, they might choose to bypass further communication and initiate a chargeback.

Delivery Problems

Shipping issues, such as long delays or non-delivery, often result in chargebacks. If a product doesn’t arrive on time or gets lost in transit, customers may dispute the charge rather than continue waiting or contacting the merchant for updates.

Merchant Mistakes

Errors made by the merchant, such as charging the wrong amount or mistakenly processing a payment, can lead to chargebacks. Even if the mistake is unintentional, many customers will dispute the charge instead of contacting the merchant for resolution.

Technical Problems

Occasionally, system glitches or technical issues during a transaction can lead to inaccurate charges. In such cases, cardholders often file chargebacks to correct the issue, particularly if they’ve been billed the wrong amount or for a failed transaction.

Unfamiliar Transactions

If the cardholder does not recognize the merchant’s name on their credit card statement, they may dispute the charge. This can happen when the merchant uses a different billing name than expected, causing confusion and leading the customer to believe the transaction is fraudulent.

Misleading Advertising

Buyers who feel misled by a company’s marketing or advertising may file chargebacks to recover their money. If the product or service fails to meet the promises made in the promotional material, the customer may believe they were duped and initiate a dispute.

Regretful Purchases

Sometimes, customers file chargebacks simply because they regret a purchase. This type of “friendly fraud” occurs when buyers want to recover their money without going through the merchant’s return process, even if there is nothing wrong with the product.

Household Fraud

Household fraud occurs when someone within the cardholder’s home, such as a spouse or child, makes a purchase without their consent. Although this isn’t considered criminal fraud, the cardholder may still dispute the transaction if they didn’t approve it personally.

Late Delivery

If an order arrives later than expected, especially if it misses a significant deadline, buyers may file a chargeback. Even if the product eventually shows up, the delay may render it useless to the customer, prompting them to dispute the transaction.

Substandard Quality

When customers feel that the product they received is not up to the standard they expected, they might file a chargeback. This is particularly common if the item’s quality doesn’t justify its price, and the buyer prefers to dispute the charge rather than return it.

Excessive Shipping Costs

Unexpected or high shipping fees can lead to chargebacks. If the buyer feels they were overcharged for delivery or if the shipping cost wasn’t clearly disclosed upfront, they may dispute the charge in an attempt to recover the additional expense.

Unwanted Recurring Payments

When customers are charged for services they thought they had canceled, they often file a chargeback. This is common with subscription services, where users either forget to cancel or are billed after they believe the service has ended.

No-Show Fees

Customers may dispute charges for services they failed to use, such as missed hotel bookings or medical appointments. Even when these no-show fees are part of the merchant’s policy, buyers might still file a chargeback to avoid paying for something they didn’t use.

Unresponsive Merchants

If customers feel ignored by a merchant, whether due to unreturned calls or emails, they may resort to filing a chargeback. A lack of communication can breed mistrust, causing the buyer to turn to their bank for help resolving the issue.

Unreliable Affiliate Traffic

Merchants may face chargebacks due to fraudulent affiliate activity, such as sending invalid traffic to their website. Dishonest affiliates may engage in deceptive practices, resulting in chargebacks that harm the merchant’s revenue.

Confusing Billing Descriptions

When a cardholder doesn’t recognize a billing descriptor on their statement, they may dispute the charge, assuming it’s fraudulent. This can happen when the merchant uses a name that doesn’t match the one the customer expected based on their purchase.

Failure to Cancel Subscriptions

If a customer forgets to cancel a service or subscription and continues to be charged, they might file a chargeback to stop future payments. Rather than contacting the merchant, they often view this as a more convenient way to resolve the issue.

Partial Delivery

If a customer receives only part of their order, they may dispute the charge for the undelivered items. A lack of communication from the merchant about delays or partial shipments can often lead to dissatisfaction and chargebacks.

Hidden Fees

Chargebacks can result from fees that the cardholder wasn’t made aware of, such as cancellation charges or additional service fees. If these costs weren’t properly disclosed, the buyer may dispute the transaction to recover the unexpected expense.

Incorrect Currency Billing

In cases where a transaction is processed in the wrong currency or the customer wasn’t informed of currency conversion fees, chargebacks may occur. This is particularly common in international purchases where buyers expect to pay in one currency but are charged in another.

Financial Strain

Some cardholders initiate chargebacks as a way to alleviate financial stress, disputing charges they regret making to recover funds. This can happen even when the purchase was legitimate, as the buyer seeks relief from overspending.

Preventing Chargebacks

Here are ten strategies we use to prevent chargebacks for our merchants:

• Advanced Fraud Prevention: Use tools like 3DS2 authentication,RDR, and chargeback alert systems to detect and prevent fraudulent transactions.
• Clear Billing Descriptors: Ensure that your company’s name is easily identifiable on billing statements to reduce confusion.
• Partner with CB-Alert: Collaborate with CB-Alert to implement robust chargeback prevention strategies and manage risks effectively.
• Transparent Transaction Details: Clearly communicate all transaction details, including rent amounts and anyadditional fees, to avoid misunderstandings.
• Offer Refunds: Providing refunds when appropriate can be a more cost-effective solution compared to managing chargebacks.
• 24/7 Customer Support: Provide round-the-clock support to address tenant concerns promptly and prevent disputes from escalating.
• Maintain Accurate Records: Keep thorough records of all transactions and communications to support your case in chargeback disputes.
• Monitor Transactions: Be vigilant with unusual transactions and promptly address any anomalies.