The chargeback guide for online merchants
What causes chargebacks, and how online merchants stop paying for them
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Chargebacks are caused by true fraud, merchant or product problems, and friendly fraud, where the real cardholder disputes a purchase they made.
Chargeback Ledger breaks down what causes chargebacks so you can see which ones you control. Fraud is fought with screening, merchant errors with clearer billing and fulfillment, and friendly fraud with recognizable descriptors and easy refunds. Every dispute adds a fee and staff time on top of the lost sale, so the real cost is always higher than it looks.
What causes chargebacks most often?
Most chargebacks trace back to one of four causes. Two of them start with the customer, and two start with the merchant. Knowing which group a dispute belongs to tells you whether to fight it, fix a process, or tighten fraud screening.
True fraud
A criminal uses a stolen card number. The real cardholder sees a charge they never made and reports it. These disputes usually carry a fraud reason code.
How fraud screening lowers thisMerchant errors
Double charges, wrong amounts, billing after a cancellation, renewals with no notice, late or misdirected shipping. The customer has a real complaint.
Fixes for billing and fulfillmentProduct or service issues
The item never arrived, arrived damaged, or did not match the listing, and the customer could not get the problem solved through support.
Why a quick refund beats a disputeFriendly fraud
The real cardholder disputes a purchase they made: buyer’s remorse, an unrecognized descriptor, a family member’s order, or deliberate abuse.
The three kinds of friendly fraud
What is a chargeback?
Definition
Chargeback, in one paragraph
A chargeback is a forced reversal of a card payment, started by the cardholder's bank after the cardholder disputes a charge. In the Chargeback Ledger definition, the key word is forced: the merchant does not choose it, as it would a refund. The issuing bank pulls the funds back through the merchant's processor while the dispute is reviewed, and the merchant usually pays a chargeback fee whether it wins or loses.
Five parties take part: the cardholder, the issuing bank, the card network that sets the rules, the acquirer or processor, and the merchant. The issuing bank controls the money during the dispute. Each dispute carries a reason code, and those codes fall into four broad groups: fraud, authorization, processing errors, and consumer disputes.
How much do chargebacks cost merchants?
By the numbers
Why the cause matters: the cost of each dispute
- $4.61 for every $1 of fraud. That is what fraud costs US merchants, per LexisNexis, as summarized by chargeback.io.
- About $110 per chargeback, all in. Processor fees run $20 to $50, but lost merchandise, shipping, staff time and higher ratios push the average to about $110 (Mastercard 2025, via ClearSale).
- 324 million disputes by 2028. Mastercard and Datos Insights project 261 million disputes worldwide in 2025, with about 74% going to a full chargeback.
- 120 days. How long consumers typically have to dispute a transaction, per the guide "Chargebacks 101: What they are and how businesses can prevent them."
More figures, each with its source, are on the chargeback statistics page.
Which chargeback causes can a merchant control?
| Cause | Who started it | Typical signal | Main fix |
|---|---|---|---|
| True fraud | A criminal with stolen card data | Fraud reason code, mismatched address or location | Layered fraud screening |
| Merchant error | The merchant's own process | Processing error or duplicate charge codes | Fix billing logic and fulfillment |
| Product issue | An unhappy real customer | Not received or not as described | Accurate listings, fast support, easy refunds |
| Friendly fraud | The real cardholder | Fraud code on an order with good history | Clear descriptor, evidence, refund policy |
How do you find the root cause of your chargebacks?
Most guides list causes. Fewer explain how to find yours. Treat chargebacks as data, not as one-off emergencies, and the pattern usually shows within a few months.
- Export every chargeback for the last 90 days with its reason code.
- Sort each one into fraud, merchant error, product issue or friendly fraud.
- Match each dispute to its order: product, order value, traffic source, shipping method.
- Fix the largest controllable group first, usually billing or fulfillment.
- Tighten fraud screening where fraud codes cluster on one product or source.
- Respond to winnable disputes with evidence that answers the reason code.
- Track your chargeback count and cost every month, next to your processing costs.
The last step is the one most merchants skip. Chargebacks and processing fees are both costs of accepting cards, and reviewing them together shows the full picture. See the full prevention plan.
Where does Avendo fit in a chargeback strategy?
No payment provider can stop chargebacks, and Avendo does not claim to. What it does is lower the other big cost of taking cards online. Avendo connects your existing checkout to multiple payment processors and routes each e-commerce transaction to the processor offering the best available rate, in real time.
Merchants never receive an invoice, bill or direct charge from Avendo. Its compensation is 10 cents per transaction, billed to the processor. You also get your transaction data and reports in one dashboard, which makes it easier to review payment activity next to your dispute records.
Fraud controls reduce how many disputes you get. Lower processing costs protect margin on every sale that does not become a dispute. Together they form a sensible risk strategy for online merchants.
Common questions
Short answers here. See all questions in the FAQ.
- What causes chargebacks?
- Chargebacks come from three sources: true fraud, where a stolen card is used; merchant or product problems, such as billing errors, late shipping or items that do not match the description; and friendly fraud, where the real cardholder disputes a purchase they made. Each cause needs a different fix, so sort your disputes by cause first.
- What is friendly fraud?
- Friendly fraud is a chargeback filed by the real cardholder for a purchase they made or authorized. Sometimes it is a mistake, like not recognizing a billing descriptor or forgetting a family member's purchase. Sometimes it is deliberate, when someone keeps the goods and asks the bank for the money back. It is hard to block because the payment looks legitimate.
- Who usually wins chargebacks?
- Cardholders win most disputes, partly because many merchants never respond. Among the disputes merchants choose to fight, US merchants win about 54%. Your odds rise when you respond on time with clear evidence that matches the reason code, such as delivery confirmation, accepted terms or customer messages.
- Do banks really investigate chargebacks?
- Yes, within limits. The issuing bank reviews the cardholder's claim and, if the merchant responds, compares the merchant's evidence against the reason code and network rules. Banks rely heavily on the documents submitted, so a merchant who sends nothing usually loses. The depth of review varies by bank and by dispute type.
- Do chargebacks ruin credit?
- No. A chargeback is not reported to credit bureaus and does not directly change a cardholder's credit score. Problems arise only if a related debt goes unpaid and is sent to collections, or if a bank closes an account over abuse. For merchants, the bigger risk is to merchant account standing, not a personal credit score.
- How long do chargebacks last?
- A typical dispute takes several weeks to a few months from filing to final decision. The cardholder filing window is commonly 120 days, the merchant then has a short deadline to respond, and the issuer decides. Disputes that go to a second cycle or to arbitration take longer. Your processor sets the exact deadlines you must meet.
- Can I go to jail for chargebacks?
- Filing an honest dispute is legal and is a normal consumer right. Knowingly filing a false chargeback to keep both the goods and the money can be treated as fraud, and in some cases it can lead to civil claims or criminal charges, depending on the amount and local law. Anyone worried about their situation should speak with a licensed attorney.
- Does Avendo stop chargebacks?
- No payment router can stop chargebacks. Its role sits beside your fraud controls: it lowers what you pay to process each transaction and gives you your transaction data and reports in one dashboard. Paired with good fraud screening and clear policies, that is part of a broader risk strategy.