What is chargeback fraud & how to avoid it

When a customer disputes a charge with their bank, it’s called a chargeback. Sometimes customers will file illegitimate chargebacks to get free products or services, which is known as chargeback fraud. Fortunately, there are ways to avoid being scammed by fraudulent chargebacks and protect your business from this type of theft. In this article, we’ll discuss what chargeback fraud is and how you can avoid it.

What is chargeback fraud?

Chargeback fraud occurs when a customer contacts their credit card issuer to dispute a charge on their bill, even though they made the purchase. The customer is essentially trying to get a refund for something they purchased, without returning the item or service.

This type of fraud is also known as friendly fraud because the customer is not trying to commit fraud against the merchant; they’re just trying to get a refund for something they feel they shouldn’t have been charged for.

How to avoid chargeback fraud

There are a few different ways you can avoid being the victim of chargeback fraud:

  1. Use strong verification methods

When a customer makes a purchase, make sure to use a strong verification method to confirm their identity. This could include requiring the customer to enter their billing ZIP code or providing a one-time passcode that is sent to their phone number. The goal is to make it difficult for someone to pretend to be someone they’re not.

  1. Keep your system updated with the latest chargeback codes

Make sure your payment processing system is updated with the latest chargeback codes. This will help you identify which charges are being disputed and why. Updating your system will also help you keep track of any changes in the chargeback process.

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  1. Keep all the records

Make sure to keep records of all purchases, including the date, time, and amount. These records will come in handy if you ever need to dispute a chargeback. Chargebacks can be a hassle if you don’t have all the information you need to prove that the customer made the purchase.

  1. Sure fraud detection tools

There are a few different fraud detection tools you can use to help identify chargeback fraud. These tools can flag certain transactions that are likely to be fraudulent. This allows you to cancel the order or take other measures to protect yourself from chargeback fraud.

  1. Train your employees to spot fraud

Make sure your employees are trained to spot signs of fraud. This could include things like multiple returns from the same customer or unusually large orders. Employees should also know how to handle suspicious transactions, such as by contacting the customer for more information.

  1. Define your return policies

Be sure to clearly define your return policy and make it easily accessible to customers. This will help prevent chargeback fraud because customers will know what to expect if they need to return an item. A clearly defined return policy will also help you resolve disputes more quickly.


As you can see there are a couple of ways you can avoid being the victim of chargeback fraud. Utilize as many of these tips as possible to help protect your business. Remember, the best way to avoid chargeback fraud is to be proactive and take measures to prevent it before it happens.

If you are looking for a secure payment solution for your business, then look no further. We specialize with many years of experience in providing robust payment solutions for businesses of any size. We only use up-to-date technologies to keep you updated with the latest trends. This way we ensure to give your customers the best possible experience. Book a free consultation call with us today, and let us take your business to the next level!

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Book a free call with us to discuss how we can help you expand in new regions, scale, and get the cash flowing in your business.

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