Chargebacks are one of the most frustrating realities of running a business. They don’t just cost you the transaction amount, they also come with additional fees, lost inventory, and time spent resolving the issue. But the good news? Chargebacks can be prevented or greatly reduced. 

In this article, we’ll break down why chargebacks happen and the practical steps merchants can take to reduce them in 2025. 

Why Do Chargebacks Happen? 

Chargebacks are reversals of card charges initiated by the cardholder. They occur when a customer disputes a transaction with their bank. Common reasons include: 

• Fraudulent transactions: The card was stolen and used 

• Unrecognized billing descriptors: The customer doesn’t recognize your business name 

• Product or service dissatisfaction: The item not as described, defective, or the customer received poor service. 

• Shipping issues: The customer experienced delays, received the wrong item, or never received the item.  

• “Friendly fraud”: The customer forgets the purchase or tries to get an item for free. 

• Subscription Cancellation Disputes: A recurring charge was disputed after a subscription service was cancelled.  

• Duplicate Processing: The same transaction was charged multiple times.  

• Incorrect Amount Charged: The charge was for the wrong amount.  

Understanding these root causes is the first step to prevention. Knowing the common reasons for chargebacks, we can put measures in place to help reduce them.  

1. Prevent Chargebacks Before They Happen

“Most merchants are reactive to chargebacks, but the BEST way to combat them is being proactive and eliminating the headaches before they start” – Brian Fehr, Senior Operations Manager, Valmar

• Write clear product descriptions: Customers should know exactly what they’re buying. 

• Use accurate images: Multiple, high-quality product photos reduce “not as described” disputes. 

• Make policies visible: Refund, return, and cancellation policies should be easy to find and easy to understand. 

• Track and confirm deliveries: Always provide tracking numbers and get signatures for high-value items.

2. Optimize Your Payment Practices

• Clean billing descriptors: Ensure your statement name matches your brand. Many chargebacks happen because customers don’t recognize the charge. 

• Use fraud checks: AVS (Address Verification Service) and CVV help confirm the cardholder’s identity. 

• Enable 3D Secure: Programs like Visa Secure and Mastercard Identity Check shift liability to the issuer and protect you. 

• Monitor transaction sizes: Flag unusually high or inconsistent orders for manual review. 

3. Strengthen Fraud Prevention

• Fraud detection software: Many modern gateways use AI to flag risky transactions. Ask your payment processor for more information on their fraud detection.  

• Blacklist repeat offenders: Track customers who frequently request chargebacks. 

• Watch for red flags: Look out for customers using rush shipping, and those who have mismatched billing/shipping addresses, or multiple failed attempts. 

 4. Improve Customer Experience

Most chargebacks can be avoided with good customer communication: 

• Be responsive: Offer phone, chat, or email support that’s easy to find. 

• Be proactive: Send order confirmations, shipping updates, and delivery notifications. 

• Refund strategically: Sometimes issuing a refund is cheaper than fighting a dispute.

5. Manage and Fight Chargebacks Effectively

When chargebacks do happen, preparation is key: 

• Keep records: Invoices, receipts, delivery confirmations, and customer communications are critical evidence. 

• Respond quickly: Processors often require responses within 7–14 days. 

• Use chargeback alerts: Your payment processor, along with third-party services, can notify you of disputes early. 

• Fight “friendly fraud”: Use delivery proof, customer service logs, or screenshots to win representments. 

The Benefits of Reducing Chargebacks 

Chargebacks may never disappear entirely, but with the right prevention, fraud tools, customer service, and dispute management, merchants can reduce their impact. 

The key is to be proactive: prevent disputes before they happen, make it easy for customers to reach you, and always keep records ready in case you need to fight back. 

“Chargebacks are not a reflection of you and your business, however, they can indicate gaps in customer support, fulfillment, and others areas that you can improve on to alleviate chargebacks! – Brian Fehr, Senior Operations Manager, Valmar

By following these steps, you’ll protect your revenue, improve customer trust, and build a healthier payment ecosystem for your business in 2025. 

Download your Chargeback Reduction Checklist 

To make it easier for your business to reduce chargebacks, we’ve created a free checklist with all of the measures you should have in place. Fill out the form below and the checklist will be sent to your email.