Protect Yourself from Chargeback Abuse

Some merchants can spend a lifetime in business and never experience a chargeback, while others are constantly under fire .

At its most basic level, a chargeback is a dispute between the customer and his or her Card Issuing Bank, and the merchant. If the merchant cannot document that a charge is legitimate, they may suffer the loss. There are various types of chargebacks:

  • Common chargebacks – Such chargebacks include services not rendered (or not provided as expected), or the product was not received. Sometimes the cardholder doesn’t recognize the charge, forgot about making the purchase, or didn’t qualify for a refund because the time limit had expired. Chargebacks can also occur through billing errors.
  • Friendly fraud – Such chargebacks occur when a cardholder disputes a charge which may be either legitimate or fraudulent. Sometimes a parent doesn’t recognize a purchase made by a son or daughter or claims that they didn’t have parental permission. A consumer may dispute a purchase because they don’t recognize the business name on their bill. Other times a customer’s authorization was never obtained or was declined by the merchant, but an employee unintentionally forced the transaction through. And of course, there is intentional fraud .

Although chargebacks take many forms, here are some experience-based ways merchants can protect themselves from chargeback abuse:

Proactively work to avoid disputes – It serves the merchant to try to resolve problems before they become a dispute, especially in a card-not-present environment. Because rules typically favor the cardholder, merchants often lose in such situations. This is especially true in he-said/she-said disputes over online purchases.

Respond promptly to retrieval requests – Some chargeback reason codes allow for a fixed period for the merchant to provide a retrieval request . This occurs before the actual chargeback debit is made against the merchant’s account. The reason code will determine whether the debit is immediate or if there is time for the merchant to provide supporting documentation before it is made. Even if it is immediate, the merchant may still have the opportunity to provide supporting documentation to defend the chargeback and receive a chargeback reversal.

Deliver as promised – A customer may be unhappy with the products or goods delivered vs. what they expected. This sometimes happens when the item delivered is felt to be different from what was shown on the merchant’s website. This is why it’s important for a merchant to make sure that their advertising, especially on their website, is descriptive and shows the item in as much detail as possible. They should also clearly explain their return policy at the time of purchase. This helps to minimize situations where a customer claims that they didn’t know they only had X days to return an item.

Collect maximum documentation – Getting a signature and requiring that a card be swiped at the time of purchase is an excellent way to refute chargebacks. And of course, it is also critical to collect the CVV at the time of purchase.

Stay current with new technology – Some chargebacks can impact merchants who fail to adapt rapidly to new technologies. For example, if a customer’s card contains an EMV chip and the merchant’s device is not EMV[1] capable it can result in an automatic chargeback . As a result of the liability shift, if there is a dispute, the merchant typically loses.


To help reduce risk and prevent payment fraud, PNC Merchant Services offers The Dispute Manager, an online sales dispute and chargeback management tool. To learn more, Contact your local PNC Merchant Services representative.

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Important Legal Disclosures and Information

1. EMV is a registered trademark in the U.S. and other countries, and is an unregistered trademark in other countries, owned by EMVCo.

Merchant Services provided by PNC Merchant Services Company and are subject to credit approval. PNC Merchant Services is a registered trademark of The PNC Financial Services Group, Inc.