Running an online store means you get many orders and payments every day. Most times, things go well. But sometimes, customers ask their bank to take money back from your account. This is called a chargeback. Chargebacks are happening more often and can cause big losses for sellers.
By 2026, there may be 377 million chargebacks, and losses could reach over USD 15 billion in 2025. Many chargebacks happen because customers say they did not receive the product or did not approve the payment.
That is why it is essential to know what happens when a chargeback is filed. Knowing the steps helps you protect your money and your business. When ready, you can handle chargebacks better and keep your store safe, making running your business easier and safer.
Introduction to Chargebacks
A chargeback occurs when a customer asks their bank to refund the money they paid for something. This usually occurs if the customer thinks the payment was a mistake, the product was not what they expected, or they did not get what they bought.
Chargebacks can be bad for your business because you lose money not just from the sale but also from fees and the time you spend dealing with the problem. As online shopping grows, chargebacks happen more often, making it harder for small businesses like yours. This means you lose the sale money, and usually have to pay extra fees for this problem.
Now, this is different from a refund. When you give a refund, you decide to return the money to the customer because of a problem with the product or service. You control the refund, and it usually happens quickly. But with a chargeback, the customer goes to their bank, and the bank controls the money until everything is sorted out. Chargebacks can take a long time to finish, sometimes weeks or even months. You can take steps to reduce them, like making sure orders are clear and customers are happy.
Key Insights into the Causes of Chargebacks
Understanding the common reasons behind chargebacks can help you fix issues early and stop them from happening again. Here are the main reasons customers raise chargebacks and what they usually mean for your business:
- Fraud: Someone uses a stolen card or makes a payment without the cardholder’s permission. The real owner reports it, and the bank returns the money.
- Friendly Fraud: The customer made the purchase but is still requesting a refund. This can happen if they forget the transaction, don’t recognise the name on their bill, or avoid the return process.
- Non-Delivery: The customer claims they didn’t receive what they paid for. This usually happens when deliveries are delayed, the item is lost, or tracking information is missing.
- Product or Service Issues: Customers file a chargeback when they receive damaged, incorrect, or poor-quality items. They believe the product didn’t match what was promised.
- Billing Errors: This includes cases where the customer is charged twice or billed after service cancellations. If the issue isn’t fixed quickly, the customer reports it to their bank.
- Unclear Statement Name: If your store name doesn’t match what appears on their card statement, the customer might think it’s an unknown charge and raise a dispute.
- Lack of Customer Support: When customers don’t get timely help or can’t contact you, they may turn to their bank to get their money back.
What Happens When a Chargeback Is Filed
For example, someone buys from your store but later asks their bank to return the money. This is called a chargeback. It can happen even weeks or months after the sale. Here’s how the whole thing works, step by step, in the simplest way:
Step 1: The customer complains to their bank
They say something went wrong. Maybe they didn’t get the item, or they say it wasn’t them who made the payment. The bank listens to their side and starts the chargeback process to help customers recover their money.
Step 2: The customer’s bank talks to your bank
The customer’s bank sends a message to your bank. This message asks you to return the payment amount from your account and return it to the customer.
Step 3: The money is taken from you
Your bank usually pulls the money out of your account without asking you first. Sometimes, they also charge you a fee for the process. So now, you lose both the payment and some extra money.
Step 4: You get a chance to speak up
Now it’s your turn. You can share proof that the sale happened. This could be a delivery slip, a receipt, or a screenshot of a chat with the buyer. The clearer your proof is, the better your chances.
Step 5: The customer’s bank checks everything
They look at the proof from both you and the customer. They try to understand what happened before making a final decision.
Step 6: A decision is made
If they believe you, you get your money back. If they believe the customer, they keep the money, and you lose the sale.
Step 7: Arbitration can happen after a chargeback decision.
If the bank supports the seller but the customer still disagrees, the customer can ask for arbitration. This means the case goes to the credit card company, like Visa or Mastercard. They review everything again and make the final decision.
This whole process is made to protect buyers from fraud. Still, some customers misuse it. So, as a seller, you need to keep good records, clear invoices, tracking numbers, and proof of delivery. That way, if a chargeback comes up, you’re ready to explain your side clearly and quickly.
Using Shiprocket Checkout for Secure, Fraud-Proof Transactions
Using Shiprocket Checkout makes selling online easier and safer. It helps your customers place orders faster by automatically filling in their addresses, reducing mistakes and speeding up checkout. Accurate addresses also mean smoother deliveries with fewer issues.
It shows buyers the exact delivery date, giving them confidence and reducing cancellations. This helps you hold on to more sales. If you deal with COD (Cash on Delivery) orders, Shiprocket Checkout also helps. It limits repeated CODs from the same person, allows you to add a fee for COD, or gives discounts for prepaid payments, leading to fewer returns and more successful deliveries.
Login is quick and safe, helping customers feel secure and return to shop again. You don’t need to be a tech expert to use it. It works well on all major platforms and is smooth on mobile. It also tracks how shoppers behave and shares insights. This helps you fix issues fast and grow your sales.
Conclusion
Chargebacks can cause problems for sellers. But knowing how they work helps you handle them better. When a chargeback happens, act fast and show proof. This can help you get your money back. Keep good records of all orders and payments. Talk with your customers to fix issues before they become chargebacks. Use safe payment methods and clear order details. This lowers the chance of chargebacks.
Chargebacks may seem challenging, but you can manage them. Being ready protects your business from losing money and helps it run smoothly. When you stay calm and prepared, customers will trust you more and want to buy from you again.
