Understanding the Top Reasons Behind Customer Chargebacks

While every reason for chargebacks is unique, there are recurring themes why customers resort to chargebacks to settle their issues. Let’s dive into why customers file disputes, so merchants like you can understand how to avoid and fight chargebacks.

The Most Common Reason for Chargebacks

1. Friendly Fraud: In these situations, customers try to contest purchases they made, often claiming they were unaware of the charge. This action by customers has become more prevalent after 2019 when e-commerce exploded as people were stuck inside their homes during quarantine. Many legitimate merchants who play by the rules are kicked off their payment processors because their customer base is prone to friendly fraud and their ~1% dispute rate is considered high-risk.

Other Common Reasons For Filing Chargebacks

1. Unauthorized transactions: This is one of the leading causes of transactional conflicts. Unfamiliar and strange charges seen by a specific customer can raise questions about possible fraud or billing mistakes. As a result, customers start chargebacks to reclaim their money for reasons related to financial security.
2. Non-Delivery or Late Delivery: Chargebacks can happen when customers pay for goods or services that fail to be delivered. Refunds and frustration are followed via chargeback due to late deliveries or lost products.
3. Defective Products: Chargebacks also commonly happen when a product is damaged, defective, or different from the expected product. Dissatisfied customers are prone to dispute the transaction.
4. Subscription Billing Issues: Subscription-based services are most prone to chargebacks. Customers complain about charges if automatic renewals are not explicit or whenever they think they have canceled a subscription but are still being charged.
5. Misleading Product Descriptions: It is essential to provide accurate product descriptions. There is the risk of a chargeback if a product or service acquired by a customer does not meet expectations set by advertisements.
6. Technical Glitches: Unintended charges could also happen during a transaction due to technical issues. Customers who experience these situations might ask for chargebacks to address the issue.
7. Billing Errors: Transactional disputes can happen if billing errors, including incorrect amounts or unauthorized charges, occur. Customers have the right to demand that their financial statements reflect their transactions fairly. Moreover, inaccuracies may result in chargebacks.
8. Unresponsive Customer Service: Customers may turn to chargebacks when they see that the merchant's customer service is not acting upon an issue that is appropriately addressed.
9. Identity Theft: Incidents of identity theft might result in unauthorized transactions, which could convince customers to submit chargeback requests to have the payments reversed.

These are just a few of the many reasons why customers file transactional disputes. Due to the possibility of financial and reputational implications of these disputes, businesses must proactively resolve them to avert chargebacks. Given how dynamic the e-commerce and consumer SaaS landscape is, recognizing and minimizing the triggers of chargebacks is an essential aspect of every merchant's operations.

Chargeblast helps hypergrowth startups reduce chargeback rates by up to 99%.

Be alerted when customers dispute a purchase with their banks. Chargeblast intercepts the dispute and allows you to refund the transaction before its recorded as a chargeback on your payment processor. Never pay dispute fees again or worry about being kicked off Stripe. Start accepting a wider range of payments.

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