Chargebacks continue to escalate as a critical pain point for merchants, with abusive disputes now dominating. Recent data reveals alarming trends in consumer behavior, regional variations in fraud patterns, and mounting financial losses.
This updated guide explores the latest statistics in chargebacks, including projections for later on in the year, and provides practical tips for fighting back and winning against unscrupulous claims.
25 Statistics Highlighting the Escalating Chargeback Crisis
Chargebacks are rising fast, driven by digital transactions and increasing misuse. High-risk industries face the biggest spikes, and even merchants with strong fraud prevention struggle to keep up. Most disputes go unchallenged, and low success rates encourage more abuse. Beyond lost revenue, businesses absorb extra costs, forcing price increases or service cuts.
- Global chargeback volume reached 238 million in 2023 and is projected to increase to 337 million by 2026, representing a 42% rise. Chargebacks are growing faster than merchants can manage, putting pressure on already thin margins. Without better prevention strategies, businesses will continue to absorb heavy losses.
- Specific industries saw dramatic increases in chargeback rates, with online travel and lodging experiencing an 816% rise, e-commerce a 222% increase, and digital goods and services a 59% spike. Digital transactions make it easier for consumers to dispute charges, whether the claims are legitimate or not. High-risk industries must be especially proactive in reducing fraud and disputes.
- The chargeback-to-transaction ratio increased by 19% overall in 2024, encompassing merchant error, true fraud, and first-party fraud. Even merchants with strong fraud prevention measures are seeing more disputes. This suggests a rise in intentional abuse rather than just accidental chargebacks.
- On average, merchants responded to 53% of chargebacks in 2023, with roughly 45% of those responses being successful. Most chargebacks therefore go unchallenged, and even when merchants fight back, success rates are low. This encourages more disputes, especially from customers who know merchants are unlikely to push back.
- In the United States, cardholders disputed at least $65.2 billion worth of charges in 2023. The total cost to U.S. merchants, including broader financial impacts, was estimated at approximately $243.75 billion. Chargebacks aren’t just a transactional issue. They drain resources, increase operational costs, and force businesses to raise prices or cut services to compensate.
A Growing Financial Toll
Fraud is a growing financial burden, costing businesses far more than just lost sales. Chargebacks are expensive, with fees and operational costs quickly adding up. High-traffic shopping periods bring even more disputes, including fraudulent claims. Yet, merchants rarely win appeals, as banks tend to side with consumers. Without better protections, businesses will continue to absorb these losses.
- Global cumulative losses in online payments due to fraud are expected to amount to $343 billion for merchants between 2023 and 2027, with Latin America suffering the most on almost every fraud metric. Fraud is a long-term financial burden. Without better defenses, businesses will keep absorbing the cost, either directly or through higher fraud prevention expenses.
- For every fraudulent transaction, merchants lose $3.75 for every $1 due to fees, lost merchandise, and the cost of labor, with the average chargeback costing $191 (up from $165 in 2021). On average, chargeback is far more expensive than the original transaction. Beyond lost revenue, businesses pay in time, fees, and damaged relationships with payment processors.
- For online retailers, the 2024 holiday shopping season saw record sales of $41.1 billion between Thanksgiving and Cyber Monday, an 8.2% increase from 2023, potentially leading to higher chargeback rates. The message? More sales mean more disputes. High-traffic periods create opportunities for both legitimate fraud and dishonest chargebacks from customers looking for a refund loophole.
- Merchants only win 18% of cases when appealing chargebacks, even though up to three-quarters of all chargebacks are reported as illegitimate. This shows that unfortunately, the system is stacked against merchants. Banks often side with cardholders, making it easy for consumers to misuse chargebacks without consequences.
Friendly Fraud: The Hidden Culprit
Friendly fraud is now one of the biggest drivers of chargebacks, with most disputes coming from legitimate purchases later denied by customers. Originally meant to protect consumers, chargebacks have become a tool for fraud, leaving merchants to absorb the costs. The problem is growing fast because it’s easy and effective, and most businesses struggle to fight back.
- Visa estimates that friendly fraud and card-not-present transactions can account for up to 75% of all chargebacks. Most of these disputes aren’t from stolen cards—they come from customers making purchases and later denying them. This puts honest businesses at risk of constant losses.
- Visa isn’t alone. Other card networks like Mastercard estimate that as much as 70% of all credit card fraud can be traced to chargeback misuse or friendly fraud. Chargebacks were designed to protect consumers, but they’re now a major source of fraud themselves. Merchants are forced to bear the cost of a system originally meant to fight fraud.
- Friendly fraud is a growing problem, rising at an annual rate of 33% according to data from Signifyd. It’s increasing because it works. Customers know they can get their money back with little effort, so more are taking advantage of the system. Merchants must therefore be prepared to take action to defend themselves.
- Nearly three-quarters of surveyed merchants reported an 18% average increase in friendly fraud over three years. Although more businesses are seeing friendly fraud rise, most struggle to fight back effectively. The longer this continues, the more normalized (and expensive) it becomes.
- Recent forecasts expect as much as a 40% rise in card disputes tied to friendly fraud by 2026—that’s next year!
Consumer Behaviour and Chargeback Abuse
Many consumers see chargebacks as an easy refund method, even when the dispute isn’t justified. Most go straight to their bank instead of the merchant, cutting businesses out of the resolution process. The convenience of chargebacks encourages abuse, especially when merchants don’t push back. Poor billing descriptors also add to the problem, with customers disputing charges they don’t recognize.
- 1 in 4 customers openly admits to engaging in friendly fraud through chargebacks. Chargeback abuse isn’t just happening, it’s intentional. Some customers see it as a loophole rather than fraud, making them more likely to do it again, especially when so many businesses aren’t fighting back.
- 53% of cardholders dispute a transaction with their bank without contacting the retailer first. This cuts merchants out of the process entirely, removing their ability to resolve the issue before it escalates into a chargeback. It’s therefore more important than ever for merchants to have visibility into their payment networks.
- Nearly half of cardholders prioritize a quick resolution, leading them to dispute transactions with banks rather than merchants. Over 70% of customers find chargebacks more convenient than seeking refunds. Speed matters more to customers than fairness. Since chargebacks feel easier than refunds, more people choose them—even when the dispute isn’t justified.
- The ease of filing chargebacks with issuing banks has contributed to the rise in friendly fraud. Also contributing to this are confusing or unrecognizable billing descriptors that confuse consumers. Customers often don’t recognize charges, assume fraud, and dispute them immediately. Clear billing descriptions and better communication can reduce unnecessary chargebacks.
Projections, Trends, and Emerging Risks
Fraud and chargebacks are rising alongside e-commerce growth, with digital transactions creating new vulnerabilities. Regions slow to adopt stronger authentication measures face the highest risks, while subscription services and card-not-present transactions add further complexities.
- Global card-not-present fraud losses are projected to reach $28.1 billion by 2026, a 40% increase from 2023 levels.
- Retail e-commerce sales are forecast to hit $7.3 trillion by 2025, up from $3.35 trillion in 2019, accelerating opportunities for fraud.
- The subscription e-commerce market is expected to grow to $904.2 billion by 2026, driven by recurring digital transactions.
- Asia-Pacific chargeback losses are set to double to $4.5 billion by 2026, fueled by rising e-commerce sales and delayed adoption of Strong Customer Authentication (SCA) tools.
- Europe’s chargeback volumes have stabilized due to widespread SCA adoption, dropping to $1.9 billion by 2026 from $2.6 billion in 2019.
- Automated fuel dispenser (AFD) fraud contributed to U.S. chargeback spikes in 2022, though chip-enabled terminals reduced fuel-related disputes by 48%.
- Latin America faces the highest fraud risk per transaction globally, with chargeback volumes in the region projected to surge to $191 billion by 2026.
Common Reasons for Chargebacks
Fraud & Unauthorised Transactions
Fraudulent activity is a major contributor to chargebacks, accounting for a substantial portion of disputes. According to Visa, fraudulent purchases and unknown transactions make up 34% of all chargebacks. Meanwhile, Mastercard reports that as much as 70% of all credit card fraud can be traced to chargeback misuse.
Friendly fraud—where a customer files a chargeback after receiving the goods or services paid for—is the main driver behind this. Merchants reported an 18% average increase in friendly fraud in the last three years.
Merchant or Product Issues
Product-related issues are another common cause of chargebacks. While they mostly relate to physical consumer products, digital products such as software and downloadable content are not immune. Examples include:
- Products not arriving, which accounts for 26% of all chargebacks.
- Receiving the wrong product, which accounts for 15% of all chargebacks.
- Items not meeting expectations (6%) or not fitting the description (5%) also contribute to chargebacks.
Billing & Technical Errors
Errors in billing and technical issues can also lead to chargebacks. A classic example is the customer being billed twice for one purchase, which makes up 3% of total chargebacks. System errors, although rare, can occur, including double payments and charging for canceled subscriptions.
There’s sometimes a human element to billing errors. Merchants, for example, might accidentally enter the wrong amount when charging a customer, and customers might enter the wrong quantity of goods when making an online purchase.
Customer Behavior & Convenience
Customer behavior is another factor playing a major role in rising chargeback rates. More than 81% of customers find filing chargebacks more convenient than initiating a refund with the merchant with 71% of customers not seeing a difference between chargebacks and refunds—unfortunately, merchants know of the difference all too well.
Similarly, cardholders are more likely than not to dispute a transaction with their bank without contacting the retailer first. This stems from convenience; it’s much easier for consumers to open their banking app and hit the dispute button than it is to find the contact details of a merchant, get in touch, and wait for a resolution.
Costs and Impact of Chargebacks on Merchants
Financial Losses
Chargebacks cost businesses more than just the original transaction value. You lose the revenue from the sale, the cost of goods or services, and additional fees. Businesses pay chargeback fees ranging from $15 to $100 per dispute.
For every $1 lost to fraud, businesses lose an average of $3.75 due to fees and overhead. The average loss per chargeback increased from $156 in 2021 to $165 in 2022. In 2023, U.S. merchants lost an estimated $11 billion to chargebacks.
Operational Burdens
Managing chargebacks takes time and resources. Many businesses assign staff specifically to handle disputes, and 61% of chargeback teams operate with only one to three employees. Two out of five merchants spend at least 10 minutes per dispute, and 18% spend more than 20 minutes.
Most merchants still handle chargebacks manually, even though automated solutions exist. Disputing chargebacks requires gathering evidence from multiple sources, which adds complexity. Businesses must also comply with changing regulations from card networks.
Reputation & Risk
Frequent chargebacks damage trust. Customers may see repeated disputes as a sign of poor product quality or service issues. High chargeback rates can also harm relationships with payment processors.
Payment providers monitor chargeback ratios. If your business exceeds acceptable thresholds, you could face higher fees or even account termination. Some industries, such as subscription services, face higher chargeback risks, accounting for 36.6% of disputes.
False Declines
To prevent fraud, businesses may decline legitimate transactions, which eats into revenue through lost sales and frustrated customers. Overzealous fraud prevention can also drive away paying customers, who may take their business elsewhere.
On the other hand, chargebacks can be costly and time-consuming to dispute. Some customers, as we discussed earlier, see chargebacks as an easier way to get refunds. Over 81% of consumers find it more convenient than contacting the merchant. More than half of cardholders dispute charges with their bank before speaking with the retailer.
Disputing Chargebacks: How To & Success Rates
Chargebacks can be costly and time-consuming for businesses. Understanding the dispute process, common mistakes, and success rates can help you recover lost revenue and improve your handling of chargeback cases.
Pay Attention to Reason Codes
Reason codes explain why a chargeback was filed and determine how you should respond. It is important to identify the correct reason code before disputing a chargeback. Providing the wrong type of evidence can result in an automatic loss.
Each card network assigns its reason codes, which typically fall into four main categories:
1. Fraud:
These reason codes indicate that the cardholder claims they did not authorize the transaction, which is common in online or phone orders.
- Visa 10.4: Fraud – Card-not-present environment
- Mastercard 4837: No cardholder authorization
- American Express F29: Card Not Present
2. Auth Issues
These codes appear when a merchant does not follow proper authorization procedures.
- Visa 11.3: No authorization obtained
- Mastercard 4808: Authorization-related chargeback
- American Express A02: No Valid Authorization
3. Processing Errors
These codes cover merchant mistakes, such as charging the wrong amount or processing duplicate transactions.
- Visa 12.5: Incorrect transaction amount or account number
- Mastercard 4834: Point-of-interaction error
- American Express P05: Incorrect charge amount
4. Customer Disputes
These codes indicate that the customer claims they did not receive the product or service, or that it did not match the description.
- Visa 13.1: Services not provided or merchandise not received
- Mastercard 4853: Cardholder dispute
- American Express C08: Goods/Services Not Received or Only Partially Received
Collect & Submit Evidence
When disputing a chargeback, the onus is on you, the merchant, to provide clear and relevant evidence that addresses the reason for it. Evidence can take various forms but will generally include:
- Transaction Documentation: Sales receipts, transaction records, signed contracts, and order forms can help confirm that the customer authorized the purchase.
- Proof of Delivery: Shipping records, tracking numbers, and signed proof of delivery can counter claims that an item was not received.
- Customer Communication: Emails, chat logs, and phone call recordings (where legally allowed) can demonstrate that a customer acknowledged receipt or agreed to the transaction terms.
- Identity Verification: AVS and CVV match results, IP address logs, and two-factor authentication records help prove that the transaction was legitimate.
Different industries will have additional evidence that they can provide. Digital goods and services providers, for example, could provide login records, download logs, and IP address matches that can confirm whether a customer accessed the service.
Timeline & Waiting Period
Each card network sets different deadlines for responding to chargebacks. Generally speaking, Visa, American Express, and Discover allow merchants around 20 days to submit a response. Meanwhile, Mastercard allows up to 45 days to respond. See here for full information on timelines.
Keep in mind that these rules might be different from the rules that acquirers impose, which may be as short as five to ten days. Once a chargeback is filed, there is often a 15-day waiting period before the issuing bank finalizes the decision. If the dispute continues, the process can extend further.
Investigation & Potential Arbitration
After you submit your evidence, the issuing bank reviews the case. If the bank rules in the cardholder’s favor, you may appeal through arbitration. However, arbitration can be expensive.
- Arbitration fees can reach hundreds or even thousands of dollars.
- The losing party is responsible for paying arbitration costs.
- The arbitration process can extend the chargeback dispute by 10–45 days.
Because of the high costs and time commitment, arbitration is typically only recommended for high-value transactions where the potential recovery outweighs the fees.
What is the Merchant Success Rate for Chargeback Disputes?
There’s no single answer to this question. Successful rates for chargeback disputes vary massively between industries, regions, and individual circumstances. However, industry data suggests the following:
- The overall merchant win rate is around 20–30%.
- About 77% of merchants have a success rate of 30% or higher.
- In friendly fraud cases, success rates can reach 43% with strong evidence.
- True fraud chargebacks have a much lower success rate of 9%.
- Some sources suggest that overall success rates can be as low as 12%, depending on industry and transaction value.
Common Mistakes When Dealing with Chargebacks
Many merchants lose chargeback disputes because of simple mistakes. The process is strict, and card networks favor customers in many cases. Missing deadlines, submitting the wrong evidence, or failing to engage with customers can make it even harder to win.
Ignoring Reason Codes
Each chargeback has a reason code that explains why the dispute was filed. If you respond with the wrong type of evidence, your dispute will likely be denied. For example, if a customer claims they never received an item, providing a signed order form won’t help—you need to submit proof of delivery. Always check the reason code first and tailor your response accordingly.
Delayed Responses
Chargeback deadlines are strict, and missing them means an automatic loss. You typically have between 10 and 45 days to respond, but some acquiring banks impose even shorter deadlines. It’s therefore important to monitor chargeback notifications daily and submit disputes as early as possible. Waiting until the last minute increases the risk of missing key details or submitting incomplete evidence.
Failing to Engage
Many chargebacks happen because customers feel ignored or frustrated. If a customer can’t reach your support team or doesn’t get a quick resolution, they may dispute the charge instead. Proactively responding to complaints, offering refunds when appropriate, and providing clear communication can help prevent chargebacks before they happen.
Not Using Fraud Protection Tools
Preventing fraudulent transactions is one of the best ways to reduce chargebacks. Fraud prevention tools can help flag risky transactions before they go through. Useful tools include:
- AVS and CVV verification to confirm the cardholder’s identity.
- 3D Secure authentication, which adds an extra layer of security for transactions.
- Machine learning fraud detection to analyze patterns and detect suspicious activity in real-time.
Submitting Weak Evidence
Weak or incomplete evidence reduces your chances of winning a chargeback dispute. Every piece of evidence should directly address the reason code and prove that the transaction was legitimate. Simply submitting a receipt or invoice may not be enough. You may also need proof of delivery, customer communication records, or transaction authentication details.
Merchants Must Be Proactive in Addressing Chargebacks
Chargebacks aren’t going away, and they’re becoming a bigger problem for merchants. Friendly fraud, rising transaction volumes, and consumer behavior shifts are driving up dispute rates, making it harder for businesses to protect their revenue. The costs go beyond lost sales—merchants face extra fees, operational strain, and reputational risks.
Fighting chargebacks requires a proactive approach. Clear billing descriptions, fraud prevention tools, and strong dispute evidence can improve outcomes. But prevention is always better than response. Setting clear refund policies, improving customer communication, and using fraud detection technology can help stop disputes before they happen.
With merchants facing higher volumes of chargebacks against a backdrop of increasingly stringent regulations and payment processor rules, such as Visa’s recent changes to the Visa Acquirer Monitoring Program, merchants must proactively defend against these escalating risks to their reputation and revenue.
