What are chargebacks and how do you prevent them?

Chargebacks happen when a customer disputes a transaction and requests a refund from their bank or card issuer. Learn what chargebacks are, why they occur, and proven strategies to prevent them for your business.

A chargeback is when a customer’s payment is reversed through their bank, sending the money back to them. For merchants, chargebacks aren’t just annoying - they cost cash in fees, lost revenue, and time.

The good news? Most chargebacks can be prevented with clear billing descriptors, proactive customer service, and fraud detection tools.

On Whop, merchants can go a step further: Dispute Fighter automates responding to chargebacks, while the Whop Resolution Center helps prevent them entirely. By combining prevention strategies with fast dispute management, you can protect your revenue and keep your business running smoothly, even when payment reversals happen.

To tackle chargebacks effectively, let’s start by understanding exactly what a chargeback is and how it works.

What is a chargeback?

A chargeback is a forced payment reversal initiated through the customer's issuing bank, not the merchant.

When a chargeback is processed, funds are removed from the merchant's account and returned to the customer, effectively undoing the sale.

Chargeback vs refund

The key difference is that refunds are negotiated directly between the merchant and the customer, while chargebacks involve the bank.

Think of it this way: a refund is a conversation you control; a chargeback is a dispute someone else controls. It’s basically a refund that you didn’t authorize and now have to respond to.

Can chargebacks happen with debit cards or credit cards?

Chargebacks work with both credit card chargebacks and debit cards.

With debit cards, funds are taken directly from the cardholder's bank account, while credit card chargebacks reverse the credit transaction.

How does a chargeback work?

A chargeback happens after a payment is processed and the funds have already landed in your account. Essentially, it’s a customer forcing their bank to reverse a transaction they believe is unauthorized, incorrect, or fraudulent.

Here’s how it typically unfolds:

1. Customer disputes the charge: The cardholder spots a transaction on their statement that seems wrong or suspicious and contacts their issuing bank to challenge it.
2. Issuing bank opens the chargeback: The bank reviews the claim and formally initiates the chargeback process with the merchant’s bank.
3. Merchant can respond: You get a chance to fight back by providing evidence that the charge was legitimate: receipts, delivery confirmation, customer communication, or any proof that supports the transaction.
4. Bank reviews both sides: The issuing bank evaluates the customer’s claim and your evidence, then decides whether to reverse the charge.
5. If the bank rules for the business: The funds stay in your account (or are returned if the customer’s account was temporarily credited).
6. If the bank rules for the customer: The disputed amount is removed from your account and returned to the customer.
7. Arbitration if needed: If the bank sides with you but the customer contests further, the dispute can escalate to the card network (Visa, Mastercard, Amex, etc.), which makes the final call.

Chargebacks are more dangerous than refunds as they’re a formal dispute that can hit your revenue, incur fees, and eat up time.

Common reasons for chargebacks

Customers initiate chargebacks for several reasons:

• Friendly fraud: A customer disputes a legitimate charge, claiming they didn’t make the purchase.
• Unauthorized transactions: Someone uses a stolen card or account information to make a purchase.
• Non-delivery: The product or service never reaches the customer.
• Product issues: The item is significantly different from the description, images, or expectations.
• Billing errors: Double charges, incorrect amounts, or misapplied discounts trigger disputes.
• Unrecognized charges: Customers don’t recognize the name or descriptor on their statement.
• Technical problems: Checkout or payment processing errors cause confusion or failed transactions.

Each of these can be prevented with clear communication, accurate billing, and proactive customer support.

Chargeback fees: how much do chargebacks costs businesses?

Beyond losing the sale revenue, chargebacks hit hard in both fees and collateral damage. Many payment processors charge merchants between US $15 and US $100+ per incident, depending on the card network, merchant’s risk level, and agreement.

These costs stack up quickly:

• Merchants pay administrative fees just to process the dispute.
• There are multiple parties involved — the issuing bank, acquiring bank, and card networks — all contributing to costs.
• Merchants invest time and resources investigating, gathering documentation, and submitting their case.
• Worse, a high chargeback rate can lead to penalties, increased processing fees, or even account termination from the processor.

For example, processors like Stripe charge a flat $15 fee per dispute in the U.S. for each chargeback, regardless of whether you win or lose. And industry benchmarks show that overall chargeback fees — before factoring in customer refunds, lost goods, or administrative time — typically start at $20–$50 per case and can rise to $100 or more for high‑risk merchants.

Each chargeback is not just a lost sale — it’s a drain on margins, a risk to account stability, and a red flag for payment networks.

How to prevent chargebacks

The best way to stop chargebacks before they happen is to set up your store and processes correctly from the start. Most disputes are avoidable when you combine clear product info, transparent policies, fast customer support, and fraud prevention tools.

Here are some proven ways to prevent chargebacks:

• Clear product descriptions: Use accurate descriptions, images, and specifications to set proper expectations
• Recognizable billing descriptor: Ensure your business name appears clearly on customer statements
• Excellent customer service: Respond promptly to inquiries and resolve issues before they escalate to chargebacks
• Transparent policies: Display refund, shipping, and return policies prominently
• Delivery tracking: Provide tracking information and delivery confirmation
• Fraud detection: Implement fraud prevention tools to identify suspicious transactions
• Clear communication: Send order confirmations, shipping updates, and delivery notifications

How to dispute a chargeback

If you believe a chargeback was made in error, you can fight it through a process called representment. This is your opportunity to prove the transaction was valid and get your revenue back.

Here’s how to dispute a chargeback effectively:

1. Gather evidence: Collect transaction records, customer communications, proof of delivery, tracking information, and terms of service
2. Respond quickly: Chargeback disputes have strict deadlines (typically 7-21 days)
3. Submit compelling evidence: Clearly articulate why the chargeback is unwarranted with supporting documentation

Disputing chargebacks on Whop with the Dispute Fighter tool

Whop merchants can use Dispute Fighter to automate chargeback disputes. The tool automatically uploads:

• Customer access logs
• Your terms of service and refund policy
• Relevant transaction data
• Supporting evidence

Whop's Dispute Fighter significantly increases merchant win rates for chargeback disputes.

Sell with Whop for the ultimate in chargeback protection

Chargebacks are a headache for every business: lost revenue, dispute fees, and wasted time. 

But with Whop, you can dramatically cut them down before they even happen.

Whop Payments is built for the future of commerce. Every checkout runs through a smart orchestration engine that increases payment approval rates by up to 11% and filters out suspicious transactions before they reach your account. 

If a dispute does occur, Whop’s Dispute Fighter tool collects evidence, responds on your behalf, and tracks outcomes in real time.

Pair that with the Resolution Center, which flags potential issues before they escalate, and you’ve got a system designed to protect both your income and your reputation.

Start selling with Whop today and protect your revenue with smarter payments, fewer disputes, and higher conversion.

Chargeback FAQs

What are chargeback regulations?

Chargebacks are regulated by both card network rules (like Visa and Mastercard) and federal laws that protect consumers. Two key regulations apply:

• Regulation E (Electronic Fund Transfer Act): Covers debit cards and electronic transfers, protecting consumers from unauthorized or erroneous transactions.
• Regulation Z (Truth in Lending Act): Applies to credit cards, ensuring fair billing practices and dispute rights.

These laws define how consumers can dispute charges — and what merchants must do to respond within set timeframes.

How long do chargebacks take to resolve?

Most chargebacks are resolved within 30 to 90 days, depending on the card network and complexity of the case. Some disputes, especially those that move to arbitration, can stretch to 120 days or more. Acting fast and submitting complete evidence gives you the best chance to shorten the timeline and win.

Can merchants win chargebacks?

Yes, if they can prove the transaction was valid. Merchants win roughly 20–40% of disputes, but success depends on how strong and organized the evidence is.

What happens if a business gets too many chargebacks?

High chargeback ratios (typically above 1%) trigger penalties from payment processors or card networks. Merchants might face higher transaction fees, stricter monitoring programs like Visa’s Chargeback Monitoring Program, or even account termination.

How can Whop help reduce chargebacks?

Whop merchants can use Dispute Fighter to automatically handle chargeback responses with pre-filled evidence and faster submissions. Plus, the Whop Resolution Center flags high-risk transactions and customer disputes before they become chargebacks, helping merchants prevent revenue loss before it starts.