Understanding Chargebacks, and How to Win  Them

A chargeback is a payment reversal initiated by a customer's bank after the customer disputes a charge. It's essentially a way for consumers to contest transactions they believe are fraudulent, erroneous, or unsatisfactory. Chargebacks are designed to protect consumers,  but they're a  complex and time-consuming burden for merchants and issuers.

They're also rapidly becoming more common. Worldwide chargebacks are expected to top $33.79 billion this year, and Mastercard forecasts  North American  chargebacks to reach $20.47 billion by 2028.

How can you avoid them? What can you do to win more of them? And what documentation should you submit? We’ve got answers... 

How can merchants avoid chargebacks?

Enhance Customer Communication and Transparency

• Make return, refund, and cancellation policies easily accessible and understandable for customers.
• Provide detailed product descriptions and terms to avoid misunderstandings.
• Ensure the payment descriptor on credit card statements is clear and recognizable.
• Keep customers informed about order status, delivery times, and any potential delays.

Implement Strong Fraud Prevention Measures

• Utilize Address Verification System (AVS) and Card Verification Value (CVV) checks to verify cardholder details.
• Implement fraud detection software that uses machine learning and other advanced techniques to identify suspicious transactions.
• Consider using identity verification tools to authenticate customers, especially for high-value transactions.
• Keep an eye out for unusual purchase patterns or high-risk transactions.

Prioritize Excellent Customer Service

• Provide multiple channels for customers to reach you (phone, email, chat).
• Respond quickly to customer inquiries and resolve issues efficiently.
• Equip your customer service team to handle disputes and potentially prevent chargebacks.

Maintain Detailed Records

• Keep records of all transactions, including purchase orders, delivery receipts, and invoices.
• Document proof of authorization for payments, especially for recurring or high-value transactions.

Stay Compliant

• Adhere to the operating regulations of payment networks like Visa and Mastercard.
• Keep up-to-date with the latest best practices for chargeback prevention.

What can merchants do to win more chargebacks?

Collect Evidence Proactively

Obtain signed service agreements or contracts at the time of onboarding new customers, explicitly stating authorization to charge the card on file.

ID and Card Capture

Where appropriate, obtain a photocopy of the cardholder’s ID and the front of the card (with sensitive data redacted per PCI standards), retained securely with the payment agreement.

Contact MerLink Early

For merchants with high dispute volumes or risk of chargebacks, reaching out to MerLink  (a TSYS chargeback management tool) for response strategy guidance (either for specific disputes or general documentation standards) can greatly increase win rates.

Digital Audit Trails

When applicable, maintain logs of login activity, IP addresses, timestamps, and digital acceptance/authorization that can help validate cardholder participation.

What documentation should merchants submit to contest chargebacks?

Proof of Delivery or Service Completion:

• Start with an accurate description of the product or service delivered.
• For physical goods, send tracking numbers, delivery confirmations, or signed receipts.
• For services, send signed contracts, work orders, completion certificates, or time-stamped service records.
• Photos of the product, service, or work in progress, especially if the chargeback is related to the condition of the product.

Transaction Records

• Original transaction receipts, invoices, or order confirmations showing details of the purchase.
• Evidence that the cardholder authorized the transaction (e.g., signed authorization forms, AVS and CVV matches, verified IP addresses)

Customer Communication

Emails, messages, or call logs where the customer acknowledges receipt or satisfaction.

Return and Refund Policies

• Clearly stated policies, especially relevant if the dispute involves non-receipt claims.
• If the cardholder signed or acknowledged the terms of service, this can be helpful. 

Digital Goods or Online Services

Logs or records showing access or downloads, including IP addresses and timestamps.

Resolution Attempts

• Evidence of any attempts to resolve the issue before the chargeback, such as attempts to offer refunds or replacements.
• Evidence of any prior refunds or replacements provided to the customer.

Rebuttal Letter

A well-written rebuttal letter is crucial, outlining the merchant's side of the story, addressing the cardholder's claims, and explaining why the chargeback is invalid.

• The letter should clearly reference the chargeback reason code, present the evidence, and explain how the evidence supports the merchant's position.
•  Ensure all documentation is accurate, well-organized, and easy to understand.
• Submit the documentation within the specified timeframe set by the card network or payment processor. 

FrontStream can help

Since 1999, FrontStream has been helping nonprofits and companies simplify fundraising, and payments are no exception. Over 1,700 companies have trusted us to integrate payment forms, simplify multi-location payments, and pay less in processing fees. 

And  every  merchant is assigned a  dedicated account manager  who’s based in the U.S. — someone who knows your business and responds in minutes, not days.

Whether you’re a nonprofit, franchise, or company,  FrontStream Payments  promises a single point of contact, same-day answers, and actual guidance.