Chargebacks are so common that most customer-minded merchants consider them a cost of doing business. To be sure, many of these are fraudulent and need to be disputed through the chargeback representment process.

Some of your procedures meant to protect consumers, and create seamless buying experiences, might be backfiring spectacularly when fraudsters decide to take them for a spin. Customer experience and satisfaction are critical, but your business needs to ensure that a customer-centric approach isn’t creating satisfied fraudsters as well.

Chargebacks are so common that most merchants consider them a cost of doing business. They’re easy to request, and financial institutions usually reverse the transaction without verifying the account holder’s claims.

It’s so easy to request chargebacks, in fact, that it’s estimated that 80 percent of them are actually fraudulent. That is, the online business has delivered the goods or services to a fraudster who wants your stuff but simply doesn’t want to pay for it.

The dollars at stake are no joke: Chargebacks due to this type of so-called friendly fraud could top $50 billion a year by 2025

It’s important for you to fight chargebacks by disputing these bogus claims when clear evidence of friendly fraud exists. Or, if a customer simply experiences buyers’ remorse, which is done through the chargeback representment process. 

What is a chargeback?

Before we dive into minimizing legitimate chargebacks, and preventing fraudulent ones, let’s define what a chargeback is.

A chargeback happens when an account holder contacts their financial institution and requests the cancellation and reversal of a transaction.

Financial institutions typically process these requests without investigating the account holder’s claims. 

Merchants bear chargeback costs, including the loss of the product or service sold (resulting in lost revenue) and a chargeback fee. Banks and credit card issuers rarely have an incentive not to process the account holder’s request. Unfortunately, this creates an environment where fraudsters easily exploit chargebacks to commit friendly fraud.

How to avoid legitimate chargebacks

These are a few strategies you can implement to prevent legitimate chargebacks:

  • Make sure your payment processor uses a business name your customers will recognize.
  • Help customers return products or request refunds if a legitimate issue arises to avoid chargeback fees.
  • Provide copies of the receipt or sales draft if a customer or financial institution sends a retrieval request.

These methods potentially prevent chargebacks for online orders:

  • Make sure customers enter the correct billing address when processing online orders.
  • Use a delivery service that provides you with tracking, proof of delivery, and a signature from the recipient for valuable items.
  • Present products and services accurately to ensure customers have realistic expectations.

The following prevention methods work best for brick-and-mortar businesses:

  • Use a compliant terminal that reads chips.
  • Verify the transaction with a PIN or signature.
  • Take a manual or electronic imprint for card-present transactions.
  • Ask for an ID to verify that the customer’s name matches the name on the card used.
  • Ask for another payment type if a card is declined instead of trying several times.

Fighting Suspicious Chargebacks

If you believe that a chargeback is fraudulent, chargeback representment offers a chance to set the record, and the financials, straight, by proving that a disputed transaction is valid and was authorized by the cardholder.

If you notice a fraudulent or suspicious chargeback request, reach out to your acquiring bank. Your bank will then communicate with the bank that issued the chargeback.

Chargeback representment can be complex based on the institution. Familiarize yourself with the policies of the bank or card issuer that processed the request before you accept the chargeback.

Chargeback Representment Requests: Pre-Arbitration

You’ll need to write a rebuttal letter that explains why the transaction is valid. Keep your letter short and factual; remember that its purpose is to prove the cardholder authorized the transaction.

The issuing bank will reconsider the chargeback request in light of the new compelling evidence you submitted. 

If you fail to follow the bank’s directions, miss a deadline, or provide insufficient evidence, the bank won’t overturn the chargeback. Also, note that the issuing bank can reverse the transaction again during a second chargeback if the cardholder presents new evidence.

A cardholder can usually dispute a charge within 60 days of the transaction. Fraudsters often let some time go by before asking for a chargeback to avoid raising red flags.

Once the issuing financial institution reverses the transaction, you have between 60 and 120 days to send a rebuttal letter and prove that the transaction is valid. The time limit varies from one chargeback code to another, and each financial institution uses different time limits.

Chargeback Representment Evidence

Although the process differs based on institution, you can usually dispute a chargeback with the following evidence:

  • A sales receipt with a signature.
  • An order form.
  • A transaction imprint.
  • Tracking and delivery confirmation.
  • Proof that your return policy is easy to find and that the customer didn’t attempt to contact you for help.
  • Any communication from the cardholder, especially if they confirm they received the item or are satisfied with the purchase.
  • Evidence that another member of the household made the purchase.
  • Records of similar purchases made in the past that weren’t disputed.
  • In some cases, proof that the cardholder was physically present in a location and used a service, such as boarding or check-in info for the travel and hospitality industry.

When a chargeback shows up in your merchant account, you see a chargeback code. Each institution uses different codes to list the reason for the chargeback.

These codes aren’t always accurate, but sometimes, they help you determine what kind of evidence you need to submit to prove that the cardholder authorized the transaction and received the product or service.

The chargeback code can indicate a processing error, authorization error, merchant fraud or other reason for disputing the transaction. Sending evidence that is relevant to the chargeback reason code and addressing the specific reason in your rebuttal letter will increase your chances of getting the chargeback reversed.

Preventing Chargeback Fraud

The chargeback representment process can be intricate and time-consuming. You can improve your chances of getting a chargeback reversed by providing the right evidence before the deadline and by turning chargeback disputes into a well-organized process. Keeping detailed transaction records and staying up to date on new policies from card issuers can reduce the impact of friendly fraud.

Of course, the best way to navigate the chargeback representment process is to avoid it entirely, flagging suspicious transactions at the time of purchase by using technology to flag high-risk transactions. uses consortium data collected across every client and partner in its network, to issue a risk score for each transaction. Collective intelligence can reveal that a customer has requested multiple chargebacks from different merchants, or seems to exploit return policies. Relying on consortium data can protect you from serial fraudsters and reduce losses linked to chargebacks and friendly fraud. 

Combined with AI which combs through these and billions of other relevant data points, you can have instant visibility into purchases that separate out real customers from fraudsters. 

To learn more about the impact of friendly fraud, and chargeback protection, check out our webinar.