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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.
What Are Chargebacks and How Do They Affect Your Business?
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 This dispute process bypasses the merchant and can result in funds being forcibly withdrawn from the merchant's account, along with additional fees.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
Stripe Chargebacks: How the Dispute Process Works
Once a customer disputes a charge, the clock starts ticking. Stripe's chargeback process is designed to follow credit card network rules while giving you a chance to respond.
Here’s how it typically works:
- Dispute initiation: The cardholder contacts their bank to challenge a transaction.
- Stripe notifies you: You’ll receive an alert in your Stripe Dashboard and by email, with the reason code and deadline.
- Submit your evidence: You upload supporting documents through the dashboard to prove the transaction was legitimate.
- Issuer reviews your response: The bank evaluates your submission and makes a final decision.
If you win, the funds are returned. If you lose, you’ll be out the transaction amount plus Stripe’s $15 chargeback fee. That’s why responding quickly and thoroughly is essential.
How to Win a Stripe Dispute: Best Practices for Merchants
If a dispute lands in your lap, how you respond can make all the difference. Winning a chargeback means convincing the card issuer that your transaction was valid—and that the customer’s claim doesn’t hold up.
Here’s how to build a winning response:
- Match your evidence to the reason code: Don’t just send everything. Tailor it based on the type of dispute.
- Include proof of delivery or service: Screenshots, tracking links, access logs, or usage data.
- Show agreement to terms: Checkout screenshots, signed contracts, refund policy acknowledgment.
- Keep it concise and professional: No emotion—just facts.
You’ll submit everything through the Stripe Dashboard, and once the issuer makes their call, Stripe will notify you of the outcome.
How to Prevent Chargebacks on Stripe
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.
Limits of Stripe Chargebacks: What Merchants Should Know
There’s no official limit on how many chargebacks you can receive with Stripe—but that doesn’t mean there aren’t consequences.
If your chargeback ratio climbs above 1%, you may be:
- Placed under review by Stripe
- Subject to withheld payouts
- Permanently removed from the platform (especially for high-risk industries)
Stripe follows industry standards set by Visa and Mastercard, who monitor merchants for excessive disputes. It’s important to keep your chargeback rate well below these thresholds to stay in good standing.
If your business is high-risk or sees lots of disputes, prevention tools like ChargebackStop or Stripe’s built-in Radar can help lower the volume before it becomes a problem.
Stop Stripe Chargebacks with ChargebackStop
Dealing with disputes manually is time-consuming, stressful, and expensive. That’s where ChargebackStop comes in.
Our platform helps you:
- Prevent up to 95% of chargebacks using Ethoca Alerts and Verifi RDR
- Automate early refunds to avoid Stripe’s $15 fee
- Monitor dispute risks in real-time so you can act fast
- Build stronger evidence packages when fighting is necessary
Whether you're using Stripe Billing, Stripe Checkout, or managing high-volume online payments, ChargebackStop keeps you ahead of disputes—so you can focus on growth, not fighting fires.
Visit us today at ChargebackStop.com and see how effortless chargeback protection can be.
