How do chargebacks work and how can I reduce them?

How chargebacks work

A chargeback begins when a cardholder disputes a transaction with their bank. The issuer provisionally reverses the payment and notifies your processor. You’ll receive a reason code and a deadline to respond. If you don’t provide convincing evidence, the issuer keeps the reversal and may assess fees.

Steps to reduce chargebacks

• Use clear billing descriptors so customers recognize charges on statements.
• Document transactions — receipts, order confirmations, tracking numbers, and signed delivery proofs are crucial evidence.
• Set and publish refund/cancellation policies and make them easy to find at checkout.
• Verify high-risk orders with AVS, CVV checks, and manual review for large or unusual purchases.
• Communicate proactively — send shipping updates and customer service replies to resolve issues before a dispute.
• Respond quickly to disputes and submit organized evidence for representment when appropriate.
• Monitor trends to identify problem SKUs, staff, or fraud patterns and adjust controls.

Working closely with your payment processor and maintaining clear records are the most effective defenses against chargebacks.