Chargebacks aren’t just a hassle. They mess with your cash flow, take time to resolve, and can shake your trust in the system. Whether it’s a case of stolen cards, “friendly” fraud, or customers who just don’t recognize a charge, the outcome tends to be the same: you’re out of money and stuck dealing with paperwork.
Stripe has a tool called Chargeback Protection that’s supposed to take some of that stress off your plate. If you’re using Stripe or just looking into your options, here’s what it actually does and doesn’t.
What Are Chargebacks and Why Do They Matter?
A chargeback is when a cardholder disputes a transaction with their bank. Maybe they claim they never made the purchase. Maybe they say they didn’t get what they paid for. Or maybe they forgot about it and hit the panic button when they saw the charge.
Once that dispute is filed, the money gets pulled from your account and held until the case is resolved. You’ll be asked to prove the charge was legitimate—receipts, tracking numbers, order confirmations, anything that shows you fulfilled your end.
For merchants, this process is draining. It hits revenue, takes time, and can even lead to higher dispute rates. If those rates climb too much, Stripe (or any other processor) could flag your account as risky, raise your fees, or limit your access.
How Stripe Chargeback Protection Works
Stripe Chargeback Protection is a paid add-on for eligible businesses. When you turn it on, Stripe will cover certain chargebacks, specifically, ones that are categorized as fraud, up to $25,000 per year in USD (or equivalent in other currencies).
Here’s how it functions in practice:
- Stripe uses its fraud detection system, Radar, to score each transaction.
- If a payment passes their checks and qualifies for protection, it gets flagged internally.
- If that payment later turns into a fraudulent chargeback, Stripe eats the cost. They reimburse you directly.
- You don’t need to fight the dispute or provide documentation.
You’re still charged a small fee for each protected payment—0.4% on top of Stripe’s usual processing fees—but in exchange, you’re shielded from the biggest fraud hits.
Pricing Breakdown
Stripe charges 0.4% per protected transaction. So if you process a $100 sale, Stripe takes 40 cents for chargeback protection. Add that to the standard processing fee (2.9% + 30¢, typically), and you’re paying around $3.60 total to process a $100 transaction with protection.
If you rarely deal with fraud, that 0.4% might feel like a waste. But if you’re in an industry where chargebacks are common, it could save you thousands.
What’s Covered (and What’s Not)
Stripe only reimburses you for fraudulent chargebacks. That includes things like:
- Unauthorized transactions
- Stolen card use
- Customers claiming they didn’t authorize the charge
But these aren’t covered:
- Product not received
- Items not as described
- Subscription cancellation complaints
- Customers just unhappy with your service
- Payments made with unsupported cards or currencies
- Transactions manually overridden after a risk alert
Even with protection on, Stripe still expects you to follow best practices. If you’re ignoring fraud warnings or using outdated billing practices, they might exclude specific disputes.
Chargeback Protection vs. Stripe Radar
These two features are related, but not the same:
- Stripe Radar is for fraud prevention. It uses machine learning to block or flag suspicious charges before they go through.
- Chargeback Protection kicks in after a chargeback happens. It’s like an insurance policy for fraud that slipped past Radar.
Radar is free by default, though there’s a paid “Radar for Fraud Teams” tier with more customization. Chargeback Protection is optional and has a separate fee.
Think of it this way: Radar stops fraud before it costs you. Chargeback Protection pays you back if it slips through.
How to Activate Stripe Chargeback Protection
You can turn it on through your Stripe dashboard:
- Go to the “Radar” section.
- Look for the Chargeback Protection option.
- If it’s available for your account, you’ll see a toggle or enable button.
Not everyone gets access. Stripe decides eligibility based on factors like industry, region, dispute history, and risk level.
Should You Use Stripe Chargeback Protection?
It depends on your business. Here’s when it might make sense:
- You sell digital goods or services that can’t be tracked with shipping
- You’re in a high-risk vertical like online travel, event tickets, or collectibles
- You’ve had multiple fraud-related chargebacks in the past few months
- You want predictable dispute costs
On the other hand, if your chargebacks come from subscription churn, unclear refund policies, or bad customer service experiences, Chargeback Protection won’t help. It only steps in for fraud.
The Best Practices Even With Protection
Don’t get too comfortable just because you’re covered. Fraud isn’t the only reason customers file chargebacks. Here’s what you should still do:
- Use clear billing descriptors so customers recognize the charge
- Send receipts and shipping confirmations automatically
- Make your refund and return policies easy to find
- Respond quickly to customer complaints
- Track deliveries, especially for high-value items
- Keep a paper trail (emails, invoices, tracking numbers)
These habits won’t just lower your chargeback rate—they’ll make your business feel more trustworthy to customers.
FAQs About Stripe Chargeback Protection
What is Stripe Chargeback Protection and how does it work?
It’s a paid add-on that refunds merchants when Stripe-eligible transactions are disputed as fraud. No evidence submission is needed for those cases.
How much does it cost?
0.4% of each protected transaction. You only pay for what’s covered.
Which chargebacks qualify?
Only fraud-related ones. Anything involving unhappy customers or delivery complaints isn’t included.
Is it worth it for small businesses?
If you see regular fraud disputes, yes. It simplifies things and adds a layer of financial safety.
Can I still fight a chargeback if I have it?
Only the ones that aren’t protected. Protected payments are automatically reimbursed.
How’s it different from Stripe Radar?
Radar tries to block fraud before the charge. Chargeback Protection helps you recover after a fraudulent charge happens.
How can I tell if a payment is protected?
Stripe will label those payments in your dashboard. You can also query them using the API.
Is there a cap?
Yes. Stripe will reimburse up to $25,000 per year per account, based on currency.
If Chargebacks Are Costing You, There’s a Smarter Way to Fight Back
If your business is seeing an increase in bank-related returns, it may be time to upgrade your fraud and payment operations. Chargeblast can help streamline dispute intelligence and reduce unnecessary losses, whether from card-based chargebacks or ACH failures.
Want to see how alerts can transform your chargeback workflow? Book a demo below or get started yourself, and let us show you how to prevent disputes before they happen.
Need help setting this up or integrating Chargeblast with Stripe? Let us know. We’re happy to walk you through it.
