How to Fight and Win a Credit Card Chargeback Dispute in 6 Steps

If left unchecked, chargeback disputes can damage your business’s reputation, even putting your merchant account at risk of termination. And chargebacks are becoming an ever-increasing problem. In fact, more than 80% of consumers have admitted that they’ve filed a chargeback because it was convenient.^[1]Chargebacks 911. “Chargeback Stats“. Accessed October 20, 2022.

Chargebacks severely cut into your precious time and bottom line. That’s why we’ve created a guide for merchants to increase their chances of winning a customer chargeback dispute! Below explains how to better manage the process and potentially recoup some of your costs.

6 Steps for Disputing a Chargeback

Whether or not you fight a specific chargeback is up to you. However, if you do decide to dispute your customer’s claim, here’s how you can streamline the process:

Step 1: Collect customer transaction details

Find the transaction in question and collect all information relevant to the transaction, like customer contact information, item details, transaction date, etc. Then, attempt to contact the customer directly as soon as possible to see if there’s a way to resolve the issue outside of a dispute.

Maintain transparent, courteous, and professional communication with your customer throughout the dispute process. Regardless of whether or not you and the customer resolve the issue, make note of your attempts. In your rebuttal letter, include these communications.

Step 2: Check the deadlines for filing a chargeback dispute

You’ll likely have a set window of time to dispute a chargeback, but it’s best to respond no later than 7-10 days after being notified. Additionally, consider setting an alert in your calendar to remind you when all documents, letters, and appeals are due.

If you miss your window of time, you’re out of luck. There’s no grace period. In fact, missing deadlines results in an automatic loss.

Step 3: Gather compelling evidence for the disputed transaction

Make sure the evidence you gather, copy, itemize, and include with your rebuttal letter is pertinent to the case and directly responds to the reason code supplied. Aim to submit the following types of evidence with your rebuttal letter:

• Card Authentication Reports: Credit card authentication reports from your payment gateway confirm the card was authenticated before the transaction was approved.
• Order Invoices: These specify the product, date, customer information, billing address, and shipping address.
• Tracking Confirmations: Include tracking numbers and any additional confirmations that there was a delivery for the parcel.
• Terms and Conditions: Print your business’s terms and conditions and be sure to include sections about your business’s return policy.
• Copy of Your Checkout Page: This highlights that the customer checked a box indicating they agreed to your terms and conditions before completing payment.

Don’t go overboard, though. Every chargeback representment case is reviewed by a real person. Getting lost in unnecessary details will only hurt your chances of winning the dispute.

Step 4: Submit chargeback dispute documents by the deadline

The major card networks dictate the rules for reversing or upholding chargebacks, and each has different criteria and schedules. Strictly adhere to any deadlines and parameters put upon you, as there’s no recourse for a missed deadline.

Step 5: Present your chargeback rebuttal

First, contact your acquiring bank to initiate the chargeback dispute. Then, submit your documented evidence, along with your rebuttal letter, proving the chargeback invalid. Defending your small business against chargebacks can take time, so give yourself plenty of it to put it all together.

Step 6: Wait for the official decision

After sending a rebuttal letter, the credit card issuer or credit card network will review the dispute and make a decision. Should the losing party appeal, the case goes into pre-arbitration. But at this point, with all of your merchant documents now submitted, there’s nothing more to do but sit back and wait for a decision.

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What Does It Mean to Dispute a Transaction?

Disputing a transaction means that a customer has opened a claim against your business stating they feel they were wrongfully charged. Upon the filing of the dispute, the cardholder’s issuing bank may initiate a chargeback against the transaction.

A chargeback could be as simple as a customer not recognizing the transaction on their billing statement. On the other hand, fraudsters abuse the chargeback system by requesting charges be reversed while keeping the merchandise.

How Do Credit Card Disputes Work?

Your business’s acquiring bank will inform you of a chargeback for a specific transaction and allot a set period of time for you to dispute it. The card issuer assigns it a chargeback reason code, a simple alphanumeric code to describe the reason for the chargeback. Also, they’ll often issue a provisional credit to the customer until there is an investigation on the claim.

Merchants are then able to dispute said chargeback by submitting a rebuttal letter and documented evidence in a process called representment. After the representment process, the card issuer reviews the evidence and determines a ruling based on the merits of the claim.

Either party can appeal the representment decision in another process called pre-arbitration. This is when financial institutions are given one last attempt to settle the transaction on their own. If that doesn’t work, the case moves to arbitration. Whoever loses in arbitration could end up paying hundreds in fees.

When Does a Dispute Become a Chargeback?

Though people use the terms interchangeably, a dispute proceeds a chargeback. A customer dispute is the official documentation of a conflict with a customer over a completed transaction. A dispute becomes a chargeback when the customer works with their issuing bank to force a reversal of the transaction.

This is not to be confused with a chargeback dispute, which is when you, the merchant, fight a chargeback. Should you do nothing, the matter simply turns into a chargeback with the potential to hurt the standing of your merchant account.

How a Credit Card Chargeback Affects Your Business

A business facing chargebacks may see an increase in its chargeback ratio and chargeback penalty fees. Chargeback penalty fees can range anywhere between $15-100 per chargeback. In addition, you lose all the sunk costs that went into that sale: the marketing, sales, personnel, and overhead.

If you have too many chargebacks on your business record, payment processors view this as a red flag. They measure this financial risk with something called a chargeback ratio—the number of chargebacks a merchant has in proportion to their total transactions. Too high of a chargeback ratio could cause your businesses to face fines, restrictions, termination of your merchant account, or even inclusion on the MATCH list.

When Should You Accept a Chargeback?

If the chargeback is the result of true fraud, merchants are required to accept the chargeback. Another reason to simply accept a chargeback is if the transaction amount is simply too small to justify the time and expense of fighting it. Additionally, if you’re missing the documentation to prove the transaction is legitimate, you may opt to cut your losses and honor the chargeback.

Consider signing up for chargeback prevention alerts that notify you as soon as a customer initiates a dispute. It also might be worth considering credit card fraud detection filters designed to decline transactions that appear fraudulent.

When Should You Challenge a Chargeback?

If you have the opportunity to refund the customer’s money before the dispute becomes a chargeback, all the better. If the dispute cannot be resolved by contacting the purchaser, it’s often in the best interest of the merchant to fight the chargeback claim. However, it’s on you to present the evidence necessary to invalidate the customer’s claim.

Though you shouldn’t challenge every single customer chargeback claim, fighting chargebacks is important for businesses accepting payments. The last thing you want is for your company to gain a reputation among fraudsters for blindly accepting all chargebacks.

Note: To understand the differences between chargebacks and returns, refer to our refunds vs. chargebacks explainer.

What Is a Chargeback Rebuttal Letter?

In a process called representment, you’ll submit a letter to the issuing bank summarizing your case, as well as why the customer was wrong to request a chargeback in the first place. In other words, the letter is meant to present all the compelling evidence necessary to dispute the customer’s claim.

The rebuttal letter should briefly state what your obligation was to the customer, whether or not you met that obligation, and what communications transpired since. Take a look at the below sample of a rebuttal letter that includes all the information you’d need to win a chargeback dispute.

Chargeback Disputes: Final Thoughts

Fighting customer chargebacks can be a costly, time-consuming headache for merchants. Unfortunately, there’s no way to prevent all chargebacks—but with thorough records, a convincing rebuttal letter, and compelling evidence, merchants can fight chargebacks and win. However, the best way to win a chargeback dispute is to try to prevent the chargeback from happening. Always provide excellent customer service, so you can keep customer disputes to a minimum. Aim to maintain meticulous records, remaining prepared to present them at any time. And finally, work with your merchant service provider to connect you with chargeback protection services to receive real-time alerts, automated dispute response, and reduced liability.

Don’t let your chargeback ratio get in the way of accepting payments!

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