Chargebacks are more than just an annoying administrative hassle. They’ll drain over $33.78 billion from retailers’ pockets in 2025 alone, according to a recent trend report from Mastercard.

That’s money you’veå already earned that can disappear with a single click.

Fortunately, the industry is adapting. Thanks to Visa’s Compelling Evidence 3.0 rules, you can now overturn friendly fraud claims by showing just two prior undisputed purchases and a matching device or IP.

Shopify has set the stage for protecting retailers from fraud liability: eligible US orders paid with Shop Pay now ship with free Shopify Protect, meaning Shopify (not you) absorbs all qualifying chargebacks.

Ahead, you’ll learn how to avoid chargebacks and reduce fraudulent transactions in your store.

Table of contents

Why chargebacks happen in 2025

Global chargeback volume is climbing fast. Mastercard projects annual disputes will reach 324 million by 2028, a 24% jump from 2025, when the direct cost to businesses already exceeds the projected $33 billion mark mentioned above.

Card networks and issuers screen claims before greenlighting chargebacks. Repeat filers and invalid requests are often stopped early, but many still land on retailers’ doorsteps.

The bigger issue is who files these disputes. Fraud-related chargebacks now represent roughly 45 % of merchants’ total volume, and almost half of that fraud is first‑party fraud—when the cardholder knowingly disputes their own purchase.

Common types of chargeback claims

Most chargeback claims fall into a handful of categories. Here are the most common ones:

\nFraudulent: An unauthorized user, often with stolen credentials, placed the order.
\nUnrecognized: The buyer doesn’t recognize your billing descriptor and assumes the charge is fraudulent.
\nDuplicate: The customer believes they were charged twice for the same item or service.
\nSubscription canceled: A recurring charge was made after the customer thought the plan had been canceled (or expected a reminder).
\nProduct not received: The order never arrived, arrived late, or tracking stalled long enough for the buyer to lose confidence.
\nProduct unacceptable: The item arrived damaged, defective, or materially different from its product description or photos.
\nCredit not processed: The buyer returned an item or canceled a service, but hasn’t seen a refund hit their statement.
\nGeneral: A catch‑all code when credit issuers can’t map the dispute to one of the categories above.

Rising first-party fraud trends

First‑party (or “friendly”) fraud occurs when the cardholder, or someone in their household using the same card, disputes a valid purchase to force a refund and keep the goods or services.

This type of fraud is growing faster than any other dispute, and the latest data shows just how quickly it’s eroding retailers’ margins:

First-party fraud accounts for 23% of global chargebacks, matching third-party fraud.
62% of merchants report a year-over-year increase in first-party disputes, with an average operational cost of $35 for every $100 contested.
A 2024 Socure survey found 43% of consumers admit to filing at least one bogus dispute, often citing financial hardship as the motive.

It’s clear that friendly fraud is quickly becoming retailers' biggest headache, which makes effective chargeback-management tactics essential.

Nine chargeback prevention strategies

1. Vet every order that seems odd

Before you slap a shipping label on that 2 am $600 order, run it through Shopify’s built‑in fraud analysis. The tool highlights red flags like:

An IP that’s far away from the shipping address
Multiple debit or credit cards were tried
Freight-forwarder ZIP codes (indicating the actual destination for the item is a different location)

It then assigns a risk level so you can pause fulfillment and verify details.

💡 Tip: Automate the process with Shopify Flow. Trigger manual review when risk is high, and capture payment instantly when risk is low. Funneling suspicious orders into a review queue dramatically cuts fraud-based chargebacks while ensuring genuine orders reach customers quickly.

2. Promote your policies everywhere

Customers are more likely to click the chargeback button when they feel blindsided.

Nip that in the bud by linking your return, shipping, and warranty policies in the header, footer, product tabs, and checkout footer—anywhere customers might look for guidance on returns and refunds.

A clearly displayed return policy is one of the top ways to defuse “credit not processed” and “product unacceptable” disputes. Reinforce the message in post‑purchase emails.

3. Create accurate product pages and descriptors

Customers often file a chargeback if the products aren’t “as described.” Counter this with zoomable, multi-angle product photos and close-ups of texture or stitching.

Add product descriptions with exact specs. including weight, dimensions, and materials—bonus points if you sell apparel and include a sizing chart—so shoppers know what to expect.

Add a note about color variance or assembly required on your product page. When buyers see exactly what they’ll receive, they default to a standard return (easy) instead of a bank dispute (expensive).

4. Clean up your billing descriptor

More than 58% of cardholders say billing statement descriptions can be confusing, and unrecognized entries spark customer disputes 27% of the time.

Swap vague payment processor strings (“PAY*123456”) for clearer alternatives like “STORE NAME – Product” or “BRAND – Subscription.” If you sell under a holding company name, add your customer‑facing brand within the descriptor and confirmation email.

Many ecommerce platforms automatically generate a compliant descriptor, but it’s worth checking yours to confirm accuracy.

💡Learn how to edit your customer statement name in Shopify Payments.

5. Send itemized digital receipts

Digital receipts that show what was bought, plus taxes, discounts, and your logo, reduce fraud driven by transaction confusion.

Ethoca’s 2024 Aite-Novarica survey found 32% of shoppers prefer receipts directly inside their banking app, while another 41% want both email/SMS and in-app copies, as they’re easier to find when reviewing charges.

Detailed receipts and live tracking updates provide customers with proof and peace of mind, so they contact you (not the bank) when an issue arises.

6. Refund first, troubleshoot later

Every chargeback carries a $5–$50 fee, which you pay regardless of whether you ultimately win the dispute. It also affects your chargeback ratio and puts you at risk of being monitored by Visa.

See a duplicate payment? Ship damaged stock? If it’s a valid complaint, issue the credit and email the customer within an hour to avoid bringing in the banks. Voluntary refunds preserve goodwill, maintain a clean ratio, and cost less than the time, fees, and potential penalties of a formal dispute.

7. Reply quickly to customer issues

When shoppers can’t reach you quickly, they ring their card issuer instead. A 2024 report from Datos Insights found that 84 % of consumers contact their bank first when something looks wrong.

Embed live chat on product description pages (PDPs) and order status pages, and set a response time of less than five minutes for new tickets. Pair conversations with instant “We’re on it” emails/SMS so customers feel heard before turning to chargebacks.

Merchants who reduce response times can see chargeback volumes decrease, because inquiries become refunds rather than bank claims.

8. Ship only to AVS-approved addresses

Visa’s Dispute Management Guidelines for Merchants flag certain address verification service (AVS) results as potential indicators of fraud.

Only shipments sent to the same address that returned an AVS match code Y (street + ZIP match) or M (ZIP match) qualify as compelling evidence if a dispute arises. 

When the AVS response is anything else—“N,” “U,” or blank—Visa recommends pausing fulfillment and contacting the buyer for confirmation before releasing the order.

9. Activate Shopify Protect

Shop Pay now includes free Shopify Protect, shifting fraud chargeback liability from you to Shopify on eligible US orders.

Turn it on in Settings → Payments, then fulfill within seven days and add carrier tracking. Orders meeting these criteria are reimbursed for the sale amount plus the chargeback fee if a fraud dispute occurs. Protected orders show a shield badge in your admin, so staff can ship immediately instead of holding orders for review.

Merchant liability and your rights for chargebacks

Unfortunately, merchants have few formal protections when it comes to chargebacks.

Most merchant rights in this area are reactive, aimed at limiting losses. Here are eight to be aware of:

Chargebacks cover the purchase price only and can’t exceed the original transaction amount. In some cases, certain shipping costs and surcharges may be included.
Chargebacks can’t cover cash-back transactions.
The customer must attempt to return the merchandise before initiating a chargeback if the item arrives after the agreed-upon delivery date.
Many cardholder agreements require the cardholder to contact the merchant and attempt to resolve the issue before filing a chargeback.
If a customer returns an item, the card issuer must wait 15 calendar days to process a chargeback (except where waiting 15 days exceeds the chargeback filing deadline), to give merchants a window to respond.
Most cardholder agreements require consumers to file a chargeback within a set number of days.
Every step of the chargeback process must be completed before proceeding to arbitration.
You, as a merchant, have the right to contest chargebacks through an arbitration process called chargeback representment.

It is this final right—representment—that is your most important right in the chargeback process.

Working with banks during chargebacks

Of course, fighting chargebacks gives you a chance to recover lost revenue. But an even more important reason to dispute potentially fraudulent chargebacks is strategic.

When retailers give in and simply accept fraudulent chargebacks to avoid the hassle, it emboldens scammers and can lead to more chargebacks.

Yes, fighting a chargeback takes time and effort. You’ll need to gather documents proving the transaction was valid. But doing so will reduce future effort by gradually decreasing your overall volume of chargebacks.

Strategically, having a reputation as a retailer who pushes back on chargeback claims will discourage would-be fraudsters from eagerly filing disputes. Likewise, it will make legitimate customers more likely to simply request a refund if doing so is faster, easier, and simpler than a disputed chargeback.

Disputing chargebacks also sends a powerful message to banks. Merchants who consistently dispute chargebacks will incentivize banks to avoid rubber-stamping claims and conduct proper due diligence. This could have the knock-on effect of making the system fairer for everyone, managing risk, lowering merchant costs, and reducing overall fraud levels.

What’s an acceptable chargeback rate?

Data shows the sweet spot is under 0.65%—about six disputes per 1,000 transactions. Anything north of that could put you on a card issuer’s watchlist and result in penalties.

Chargeback rates vary by industry, according to data compiled by Clearly Payments:

\nEducation and training: 1.02 %
\nTravel: 0.89 %
\nHealth and wellness: 0.86 %
\nGaming: 0.83 %
\nSoftware and SaaS: 0.66 %
\nMedia and entertainment: 0.56 %
\nFinancial services: 0.55 %
\nRetail: 0.52 %
\nRestaurants: 0.12 %

Tools to manage and decrease fraud

Manual review can’t keep pace with hundreds of millions of disputes filed each year. Use the fraud detection tools below to stop fraudulent transactions before they ship, and let machines handle the paperwork when problems arise.

Shopify Payments

Shopify Payments offers automatic dispute resolution, which compiles a complete picture of every transaction and helps you win more disputes more often.

Shopify Flow

Shopify Flow lets you build “if this → then that” workflows triggered the moment an order is placed. Common strategies to reduce chargebacks include:

\nAuto‑tag risky orders: When Shopify fraud analysis indicates risk is high, tag the order “Hold‑for‑review,” pause fulfilment, and notify your ops Slack channel.
\nInstantly capture or cancel: If fraud analysis says risk is low, capture payment and create the shipping label. If risk is high and AVS indicates a mismatch, cancel and refund automatically.
\nEscalate for ID verification: Trigger a Klaviyo or Gorgias sequence asking the buyer for photo ID or proof of billing address; fulfill once documents are approved.

Third-party apps

Here are three Shopify-ready apps that combat fraud from different angles:

\nChargeflow: Focused on post‑transaction recovery, Chargeflow automatically assembles dispute evidence from Shopify, carrier tracking, and help‑desk tickets, then submits it on your behalf—boosting win rates without adding manual workload.
\nSignifyd: This app leverages global device fingerprinting and network consortium data to approve more legitimate orders and block first‑party fraud. Its Guaranteed Chargeback Protection shifts liability for approved transactions to Signifyd.
\nNoFraud: NoFraud runs each transaction through hundreds of proprietary and open source data points, delivering an instant pass/fail decision backed by a financial guarantee. Approved orders remain protected in the event of a chargeback.

Manage fraud prevention more effectively with Shopify

No matter how diligent you are in following the steps above, you’ll eventually face some chargebacks. So, how should you deal with them when they happen?

One way is to maintain an ironclad system of records demonstrating that the purchases in question were legitimate. Shopify Payments is specifically designed to integrate seamlessly with related services, like Shop App and Shopify Shipping, stitching together checkout, receipts, shipping, and package tracking all on one platform.

With every data point already linked, Shopify can easily assemble and submit evidence for you to improve your win rate. Turn it on once, let Shopify handle disputes, and stay focused on growing your sales.

Prevent chargebacks FAQ

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Is there a way to prevent chargebacks?

Yes, by combining card network checks with Shopify’s built-in fraud-prevention tools. Visa’s Order Insight lets issuers pull real-time basket data so many claims never escalate to formal disputes. Shopify’s fraud analysis tools block and tag high-risk checkouts before payment is captured.

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Can a chargeback be stopped?

Chargebacks can only be stopped during the pre-dispute window, when an issuer asks for extra transaction details. If you respond promptly or issue a goodwill refund, they can close the case without it becoming a chargeback.

Once the dispute is filed with the card network, it can’t be withdrawn. You must either accept the loss or contest it through representment.

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How do you fight chargebacks?

Submit a representment packet that proves the transaction was legitimate within the issuer’s deadline (as little as seven days). Tools like Shopify Payments automate this evidence gathering and raise win rates by ensuring packets comply with Visa and Mastercard rules by default.

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What is the best excuse for a chargeback?

Card networks only recognize specific reason codes, like fraud/unauthorised use, goods not received, or merchandise not as described. They must be genuine. Filing under a false pretext is first-party fraud and breaches cardholder agreements. The “best” reason is therefore the honest one that matches the transaction issue.

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What are your rights as a merchant when someone lodges a chargeback against you?

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