3 minutes

Proven Strategies to Prevent Chargebacks for Stripe Merchants

Written by
Matthew Reid
Published on
March 5, 2024


The landscape for payments is ever changing, be it e-commerce or Software as a Service (SaaS), as a Stripe merchant you must have a solid chargeback strategy in place. Chargebacks can be disruptive to your business, not only losing you revenue but harming your reputation. This article will guide you through the optimal Stripe setup for combatting chargebacks.

Understanding Chargebacks and Their Impact

A chargeback occurs when a customer disputes a transaction with their bank or credit card issuer, seeking a refund. This is usually the case if they don’t recognise the transaction or suspect it to be fraud. This dispute process bypasses the merchant and can result in funds being forcibly withdrawn from the merchant's account, along with additional fees. Stripe charges a $15 fee for each chargeback you receive. So it’s important to set up your account

Proactive Measures to Prevent Chargebacks

1. Be clear and transparent

Make sure your statement descriptor (the text that appears on your customer’s credit card statement) is clear and descriptive of your service. A hack that is used by some merchants is to set the descriptor to a short url that takes the customer directly to a self-service customer portal (such as the PriceWell no-code customer portal).

2. Allow customers to manage their own subscriptions

As mentioned above, letting your customers manage their own subscription is vital. It avoids costly customer support but also leads to greater trust in your service. If you aren’t a developer, using a tool like PriceWell will help you create a self-service portal that works on any website. From the Stripe billing portal, customers can cancel their subscription but also update their details (such as updating an expired card) or change their plan.

3. Enable Stripe Radar

Stripe Radar offers advanced fraud protection features, including built-in machine learning algorithms that analyze transactions for signs of fraud and block them automatically. The rules are configurable and it’s easy to update them as you get more information about your chargeback rate (how often you get a chargeback). By leveraging these tools, merchants can minimize the risk of chargebacks resulting from fraudulent activity.

4. Refund customers automatically

Using a tool like ChargebackStop, you can automatically refund customers who are about to raise a Chargeback and in the process avoid the $15 fee.

Understanding Stripe's Chargeback Fee

One common query among Stripe merchants is, "How much is Stripe's chargeback fee?" Stripe imposes a chargeback fee of $15 for each disputed transaction. This fee is levied to cover the costs associated with managing the dispute process, including administrative overhead and potential arbitration expenses. It's essential for merchants to factor this fee into their cost calculations and adopt preventive measures to minimize chargeback occurrences. Using ChargebackStop will help you avoid this fee altogether.