What are the most common reasons for a chargeback?

Chargebacks typically fall into three main categories: fraud, consumer disputes, and processing errors. Understanding these can help you prevent disputes and protect your business.

Fraud-Related Disputes

These occur when a cardholder claims they didn’t authorize the transaction. Most fraud chargebacks involve Card Not Present (CNP) purchases, such as online sales.

Common causes include:

• Unauthorized use of a stolen or compromised card  
• Friendly fraud (e.g., a customer falsely denies making the purchase or someone close to the customer initiated the transaction)
• Account takeover (e.g., fraudsters gain access to a legitimate account and make an unauthorized purchase)
• Unrecognized charges due to unclear billing descriptors

Even if the transaction was approved, these disputes can still result in chargebacks.

Consumer Disputes

These happen when a customer is dissatisfied with the product or service, or when the purchased service/product wasn’t provided. In these cases, the cardholder admits that the transaction was legitimate.

• Typical reasons for such disputes include:
• Item not received
• Product not as described or defective
• Service was canceled by the customer, but they were still charged
• Unexpected recurring charges

In these cases, customers may file a chargeback instead of contacting the business directly, especially if the return or refund process feels unclear or difficult.

Authorization Disputes

Such disputes occur when you process a transaction without following the proper authorization rules required by card networks. As no valid approval was received for the payment, the issuing bank reverses the charge on the card. Common causes include:

• No authorization: if you didn’t request approval from the issuer before completing the transaction.
• Declined authorization: if you processed the payment even though the issuer declined it.
• Expired authorization: if you received approval but waited too long to submit it.
• Invalid authorization: if you used the wrong account number, an expired card, or an incorrect approval code.
• Transaction after hold release: if you place a hold on a payment, release it, but still charge the card later without new authorization approval.

Processing Error Disputes

These are technical or operational mistakes during the transaction process.

Examples include:

• Duplicate charges, i.e. the customer was charged twice for the same purchase
• Incorrect transaction amount, i.e. the billed amount doesn’t match the receipt or agreement
• Late presentment (settled outside allowed timeframe)
• Wrong currency charged
• Transaction billed but not completed (sale was cancelled but still billed)
• Invalid data submitted (e.g., wrong account number or merchant ID)

To reduce chargebacks, ensure clear billing descriptors, transparent refund policies, and prompt communication with customers. Regularly review your transaction logs and respond quickly to disputes with accurate documentation.