As a business owner, I’ve faced the chargeback situation more times than I’d like to admit. Chargebacks can drain your profits and damage your reputation. Understanding why they happen is the first step to preventing them.
In this post, I’ll break down the most common chargeback reasons based on recent data. I’ll also share practical strategies to reduce your chargeback rate. Whether you’re an established merchant or just starting out, these insights will help protect your business from unnecessary financial losses.
Let’s dive into the world of chargebacks and discover how to keep your business safe from these costly disputes.
What Exactly Is a Chargeback?
Before jumping into the reasons, let’s clarify what a chargeback actually is.
A chargeback occurs when a customer disputes a charge with their bank or credit card company instead of contacting the merchant directly for a refund. The bank then forcibly removes the funds from the merchant’s account while investigating the claim.
Originally designed as a consumer protection mechanism, chargebacks have unfortunately become a major headache for businesses, especially with the rise of “friendly fraud” (more on that later).
The 7 Most Common Chargeback Reasons
Based on recent industry data, here are the top reasons customers file chargebacks:
1. Unknown or Fraudulent Purchase (34%)
This is by far the biggest category of chargebacks. When customers see charges they don’t recognize on their statements, their first instinct is often to call their bank and dispute the transaction.
These chargebacks happen because:
- The customer truly doesn’t recognize your business name on their statement
- Someone actually stole their card information
- A family member made an unauthorized purchase
- The customer is committing friendly fraud (they bought the item but claim they didn’t)
2. Product Never Arrived (26%)
The second most common reason for chargebacks is non-delivery. Customers pay for products but claim they never receive them. This can happen due to:
- Actual shipping errors or lost packages
- Delivery to the wrong address
- Theft after delivery
- Customer falsely claiming non-delivery
3. Wrong Product Delivered (15%)
When customers receive items different from what they ordered, they may file a chargeback. This includes:
- Receiving the wrong size, color, or model
- Getting a completely different product
- Receiving only part of an order
- Quality issues with the delivered product
4. Product Doesn’t Meet Expectations (6%)
Sometimes customers feel disappointed with their purchase, believing the product quality doesn’t match what was advertised. They might file a chargeback if:
- The product functions poorly
- The quality seems lower than expected
- The features don’t work as described
- The item appears used or damaged
5. Product Doesn’t Match Description (5%)
Similar to the previous reason, this happens when there’s a significant mismatch between your product description and the actual item. Customers feel misled when:
- Product photos were misleading
- Key features were exaggerated
- Important limitations weren’t disclosed
- Materials or dimensions were inaccurately described
6. Double Billing (3%)
Some chargebacks result from actual merchant errors. Customers might be charged twice for the same transaction due to:
- Processing errors
- System glitches
- Accidental duplicate charges
- Subscription billing issues
7. Poor Customer Service (2%)
When customers can’t resolve their issues through normal channels, they often turn to chargebacks as a last resort. This happens when:
- Refund requests are ignored
- Customer service is slow or unresponsive
- Return policies are unclear or too strict
- Communication breaks down between customer and merchant
The Hidden Threat: Friendly Fraud
Did you know that an estimated 80% of fraud-related chargebacks are actually “friendly fraud”? This occurs when customers make legitimate purchases but later dispute them, claiming they didn’t authorize the transaction or didn’t receive the goods.
Common friendly fraud scenarios include:
- A customer who experiences buyer’s remorse
- Someone who doesn’t want to pay return shipping fees
- A person who misses the return window
- A family member makes a purchase the cardholder doesn’t approve of
This type of fraud is particularly troubling because it’s often difficult to distinguish from legitimate fraud cases.
How to Prevent Chargebacks
Now that we understand the most common chargeback reasons, let’s look at effective prevention strategies:
For Fraudulent Purchase Chargebacks:
- Use a recognizable billing descriptor that matches your business name
- Implement strong fraud detection tools
- Request CVV codes and use address verification
- Consider 3D Secure for higher-risk transactions
- Keep detailed transaction records including IP addresses
For Product Non-Delivery:
- Use trackable shipping methods with delivery confirmation
- Keep proof of delivery for all orders
- Communicate shipping delays proactively
- Set realistic delivery expectations
- Consider shipping insurance for valuable items
For Wrong Product/Doesn’t Meet Expectations:
- Use high-quality photos and videos of actual products
- Write detailed, accurate product descriptions
- Implement quality control before shipping
- Include product dimensions and specifications
- Be transparent about product limitations
For Billing Issues:
- Regularly audit your payment system for glitches
- Clearly explain billing practices, especially for subscriptions
- Send receipts immediately after purchase
- Make cancellation processes straightforward
- Use clear payment descriptors
For Customer Service Issues:
- Respond quickly to customer inquiries
- Make your return policy prominent and easy to understand
- Offer hassle-free returns when appropriate
- Train staff to handle difficult situations
- Provide multiple contact options for customers
Understanding the most common chargeback reasons is essential for protecting your business in 2025 and beyond. By implementing these prevention strategies, you can significantly reduce your chargeback rate and save money.
Remember that many chargebacks result from simple misunderstandings or communication breakdowns. Being proactive about customer service, clear in your product descriptions, and transparent in your policies goes a long way toward preventing disputes.
Have you experienced chargebacks in your business? What strategies have worked best for you in preventing them? I’d love to hear your experiences in the comments below.