Chargebacks explained: how to minimise risks and protect your revenue

When revenue disappears into dispute queues, it's not just a payment issue but a business problem. Chargebacks touch every part of your operation: reconciliation, compliance, risk, and ultimately, your bottom line. For finance leads and payment heads alike, knowing how chargebacks work isn't optional. It's fundamental.

What is a chargeback and why does it matter?

A chargeback is when a cardholder challenges a transaction, asking their card issuer to pull funds from the merchant and return them. Originally introduced to shield consumers, chargebacks are now also a major signal of friction in your payment experience.

Why should this concern you? Because each chargeback triggers operational cost, reputational scrutiny, and in some cases, acquiring bank reviews. Understand the chargeback process well enough, and you begin to control the risks rather than react to them.

Types of chargebacks

True fraud

These disputes arise when someone uses a card they don’t own. Fraudulent use—pure and simple. The cardholder reports it, the bank reverses it, and you're left holding the cost. These are clear-cut cases of fraud and require immediate attention to mitigate future exposure.

Friendly fraud

This is murkier. The buyer made the purchase themselves but later disputes it. Sometimes they forgot. Sometimes they regret it. Either way, the result is the same: the transaction is questioned.

Merchant error

Not every chargeback is hostile. Errors like charging twice, billing inaccurately, or failing to ship goods open the door to legitimate disputes.

Understanding the chargeback process

It begins with a cardholder contacting their issuing bank to flag a problem. That bank issues a provisional credit and passes the claim to the card network (Visa, Mastercard, etc.), which routes it to your acquiring bank.

You're then asked to respond. This is your opportunity to dispute the chargeback with evidence: delivery confirmations, email trails, order logs. If your case stands, the funds are returned. If it doesn't, the chargeback holds. Some cases advance to arbitration, where additional reviews and associated fees apply.

You generally have 30 days or fewer to reply. Miss that, and the dispute closes against you.

Common chargeback reason codes

Each dispute carries a specific reason code—this code signals the rationale behind the chargeback. While the concepts are broadly similar, the terminology and structure can differ across networks. Understanding how top card networks like Visa, Mastercard, and American Express frame these codes lets you respond with accuracy, not guesswork.

Source: Visa, Mastercard, American Express

Knowing which code applies helps shape your evidence. For example, proof of delivery may suffice for 13.1, but a copy of the cancellation confirmation is what wins cases under 13.2. A generic response rarely makes the cut. Precision matters.

Financial impact of chargebacks on merchants

Chargeback fees

Each dispute usually triggers a chargeback fee. It applies whether you win or lose. Accumulate enough, and these fees chip away at your margin.

Operational cost

Behind every dispute sits time, which your team could spend on something else. Tracking transactions, pulling receipts, chasing issuing banks. It adds up.

Revenue loss

When a chargeback holds, you not only lose the payment. You also lose the product or service. And if chargeback rates climb, your merchant account might come under scrutiny.

Strategies to prevent and reduce chargebacks

Use AI-powered fraud detection tools

Solutions like AVS, 3D Secure, and Antom Shield identify risk in real time. They block questionable activity before it becomes a dispute.

Transparent billing practices

Unclear descriptors confuse customers. Clear language on account statements helps avoid unnecessary complaints and reduces the risk that customers will initiate a chargeback.

Strong customer support

Make it easy to contact you. When people reach you directly, they're less inclined to involve their bank or dispute a charge. Fast, responsive support gives you a chance to resolve issues without escalation.

Antom’s intelligent retries and real-time fraud screening are built to reduce the disputed amount and avoid triggering a chargeback in the first place.

Chargeback representment: how merchants can dispute a claim

You can dispute a chargeback through representment. That means gathering evidence and resubmitting the transaction for review.

Here’s a list of commonly accepted documentation depending on the dispute reason:

• Proof of delivery: Shipping confirmation, tracking number with delivery status, or signed proof of receipt
  
  
• Order confirmation: Email or invoice showing purchase details, terms, and customer agreement
  
  
• Customer communication: Chat logs, emails, or support tickets showing interaction and resolution attempts
  
  
• Transaction records: Payment authorisation and capture logs, showing successful completion
  
  
• Cancellation terms: Clear and visible cancellation/refund policies acknowledged by the customer
  
  
• Usage evidence: IP address logs, download records, or service logs showing the product was accessed or used
  
  
• Refund history: If a refund was already processed, show proof of that refund
  
  

Tailoring this evidence to the specific chargeback reason code is what makes a response credible. Repetition won't win cases—relevance will.

To improve success rates, match your evidence precisely to the reason code. Generic submissions rarely win. If the issue escalates to arbitration, the cost rises and the timeline stretches.

Leveraging dispute management tools

Antom helps streamline the chargeback process with chargeback automation, templates, and real-time dashboards. Track your liability. Monitor case status. Respond quickly.

Incorporating these tools into your existing payment processing and reconciliation flows lightens the load on finance and operations. Whether it's a debit or credit card transaction, real-time tracking of disputed charges gives you the upper hand.

Chargeback vs. refund: what's the difference?

To manage disputes effectively, it's essential to recognise the difference between a refund and a chargeback. Here's how they compare:

Whenever possible, process a refund promptly if the customer raises an issue. It's typically more efficient, protects your chargeback rate, and allows for direct resolution with the buyer.

Final thoughts

Chargebacks aren’t just about disputes. They’re about cost control, payment reliability, and customer perception. A disjointed dispute process isn’t just inefficient but also risky.

By addressing chargeback fraud prevention early, adding automation, and responding strategically, you minimise loss and protect your financial ecosystem. Work with a payment processor that supports full visibility, helps flag issues, and assists you in responding to each dispute or a charge without delay.

Winning the chargeback dispute isn't just about recovering revenue. It's about maintaining trust—with customers, with banks, and across every transaction you process. From the moment a debit is declined to the point of reversal, staying proactive is your best defence.