Disputes
What is a chargeback?
Last updated:
What happens when a customer files a chargeback?
A chargeback happens when a cardholder disputes a transaction with their bank, which temporarily reverses the payment and withdraws the funds from your account while it reviews the claim.
Why it matters: The Merchant Primer treats chargebacks as a cost problem, not just a fee. One dispute can take the sale amount, the goods, the shipping, a chargeback fee, and hours of staff time. Repeated chargebacks can also bring higher processing costs or account reviews, so prevention protects both your margin and your merchant account.
What a chargeback really costs
| Cost | What it covers |
|---|---|
| Disputed sale amount | The revenue reversed out of your account |
| Product or service cost | What you spent to deliver, unless the goods are recovered |
| Shipping and fulfillment | Usually lost whatever the outcome |
| Chargeback fee | Charged by your processor per dispute |
| Staff time | Hours spent gathering evidence and responding |
A quick way to feel the impact: divide the total loss by your profit per sale to see how many new sales it takes to recover from one chargeback.
How the chargeback process works
- The cardholder contacts their bank or card issuer to dispute a charge.
- The issuer reverses the payment and the funds are withdrawn from your account.
- Your processor notifies you and you can submit evidence, such as delivery proof or communications.
- The issuer reviews the case and decides whether the funds return to you.
How to reduce chargebacks
Fraud controls such as risk scoring, velocity rules, IP and location checks, address mismatch checks, email quality checks, and manual-review thresholds can lower the risk of chargebacks. No tool can eliminate them. Beyond fraud tools, many disputes are avoidable:
- Use a billing descriptor customers recognize on their statements.
- Describe products accurately and post a clear refund policy.
- Answer customer complaints quickly, before they become bank disputes.
- Keep delivery confirmation and order records for every sale.
Avendo's pricing page includes a section on how chargebacks are handled, and its site offers a free chargeback true-cost calculator. For how dispute costs fit into total spend, see credit card processing costs, or return to how to accept credit card payments online.
Paying too much to process cards, too?
Chargebacks are one cost; your processing rate is another you pay on every sale. Contact Avendo to see whether its processors can compete for your online transactions and what you could save.
Common questions
What is a chargeback?
A chargeback happens when a cardholder disputes a transaction with their bank or card issuer. The bank temporarily reverses the payment and withdraws the funds from your account while the dispute is reviewed. Beyond the lost sale, merchants usually pay a chargeback fee and lose the goods, shipping costs, and staff time spent responding.
How can I reduce chargebacks?
Fraud controls such as risk scoring, velocity rules, IP and location checks, address mismatch checks, email quality checks, and manual-review thresholds can lower the risk of chargebacks, though no tool can eliminate them. Clear product descriptions, a recognizable billing descriptor, and fast replies to customer complaints prevent many disputes before they start.
What is payment tokenization?
Payment tokenization replaces a card number with a random token that is useless if stolen. The real card data is stored securely by the processor or a token vault, and your systems keep only the token for refunds and repeat billing. It simplifies token management across multiple processors, which matters when payments can be routed to more than one.
What is the safest way to pay with your credit card?
The safest options are a mobile wallet or contactless tap in person, and a tokenized wallet or trusted checkout online, because each replaces your real card number with a token. Credit cards also generally offer stronger dispute protections than debit cards, since fraud does not drain your bank account directly. Turn on transaction alerts for extra safety.
How much does credit card processing cost?
Typical credit card processing fees range from 1.5% to 3.5% plus a flat fee per transaction. The average retailers pay is 2.3% per credit card transaction. Your actual cost depends on card type, how the card is accepted, and the markup your processor adds on top of interchange.