Does a chargeback hurt the company?
Asked by: Tracy Strosin | Last update: February 11, 2026Score: 4.7/5 (29 votes)
Yes, chargebacks significantly hurt businesses by causing direct financial losses (lost revenue + fees), increasing operational costs (labor, time), damaging merchant standing with processors, distorting key metrics, and potentially leading to account termination, making it harder to accept payments. A single $100 chargeback can cost a business over $200 when all factors are considered, and high chargeback rates can label a business as high-risk.
Do companies lose money from chargebacks?
The direct result of a chargeback is financial loss. From a financial perspective, you not only lose the money, but also the product or service that you sold to the customer as they won't return it.
Do companies care about chargebacks?
That's why companies hate chargebacks. It's not just the money lost in a single transaction. It's the risk of losing their entire ability to take payments.
Does chargeback affect business?
The effect of chargebacks on your business and finances
The business impacts include: Financial losses: Chargeback fees, lost revenue, and potential penalty charges. Administrative burden: Time spent gathering evidence and managing disputes. Relationship damage: Strained partnerships with payment processors.
What are the consequences of chargebacks?
For businesses, chargebacks can result in financial losses, damage to their reputation, higher fees from payment processors, and even losing the ability to accept credit card payments. To compound these issues, fraudulent actors sometimes use chargebacks as a tool to steal from businesses.
Merchant Explains How To Fight Chargebacks
Can a company sue you if you chargeback?
The business can sue the person who issued the chargeback in small claims. Why? Because the business performed the service and they should get paid for their work. In this article, we cover what chargebacks are, what friendly fraud is, how to fight chargeback fraud in small claims, and the chargeback process.
Do banks really investigate chargebacks?
A bank has 10 business days to investigate a claim and reach a decision after they're notified. If they confirm the fraud claim is legitimate, they'll refund the customer. Some cases are more complicated, and banks may take up to 45 days for these.
Does disputing a charge hurt the company?
Merchants typically incur various costs, including the following: Loss of revenue: Chargebacks result in a direct loss of revenue for merchants, as they have to refund the disputed amount to the customer.
Do companies get fined for chargebacks?
A chargeback fee is a penalty imposed on a merchant when a customer disputes a transaction and the bank or payment processor reverses the charge. This fee is imposed to cover the administrative costs associated with managing the chargeback process. Chargeback fees typically range from $15 to $50 per incident.
Do merchants ever win chargeback disputes?
Yes, merchants absolutely win chargeback disputes, but it depends heavily on having strong, organized evidence to prove the transaction was valid and service/product was delivered, with win rates averaging around 20-30%, sometimes higher with good preparation. Winning requires detailed records, proof of delivery (signatures, GPS), customer communication, and clear terms, though results vary by dispute type (fraud vs. "friendly fraud") and card network.
Is it worth fighting a chargeback?
Disputing chargebacks that are high-value transactions can help you recover substantial revenue. Let's take a $500 order disputed as fraudulent, this alone is worth the effort because of the substantial revenue that can be recovered.
What is a good reason to file a dispute?
That is, if a transaction was unauthorized, or if something you bought arrives broken, isn't what you ordered, or never arrives at all. You may also be able to dispute if the merchant fails to provide your refund, makes a mistake, or is otherwise uncooperative.
Do chargebacks hurt credit score?
No, a legitimate chargeback does not directly hurt your credit score, but related actions like failing to pay undisputed charges or a fraudulent dispute can cause damage. While a dispute is investigated, your account might show a temporary "in dispute" note (like "XB"), but this usually doesn't affect your score, though lenders might see it. The key is to keep paying your bill and avoid late payments while the chargeback is in progress.
Who decides who wins a chargeback?
The acquiring bank decides to accept or dispute the chargeback. When the decision is to dispute, the merchant is informed, too often with limited time to build their chargeback representment case. The evidence that the merchant must provide in representment is a critical factor in the chargeback decision .
How many Americans have $20,000 in credit card debt?
While exact real-time figures vary by survey, recent data from early 2025 and 2026 suggests a significant portion of Americans carry substantial credit card debt, with estimates ranging from around 20% of all Americans owing over $20,000 (a 2021 survey) to specific surveys finding that over 23% of those with maxed-out cards and a notable percentage of middle-income earners fall into this category, with trends showing increasing balances due to inflation.
Can I go to jail for chargebacks?
You can't go to jail for legitimate chargebacks under the Fair Credit Billing Act. However, you can face serious legal trouble, including potential jail time and hefty fines, if you file fraudulent chargebacks (knowingly making false claims to get a refund), as this is considered a form of fraud, potentially falling under federal wire fraud or mail fraud statutes , especially for large amounts or organized schemes.
Can a company come after you for a chargeback?
A chargeback can be a powerful tool for consumers who do not receive products or services they paid for, but it comes with several caveats. Even if the credit card company sides with you, the merchant may not—and they may try to collect the chargeback funds. This is called a chargeback dispute.
What evidence do I need for a chargeback?
a detailed description of the goods or services you paid for (e.g. colour, brand, size of goods), and estimated delivery dates. what has gone wrong with the goods or services delivery. proof of the return of goods to the retailer, if they are faulty.
What are the downsides of chargebacks?
But with the great power of a chargeback comes great responsibility. Chargebacks are costly to retailers. Not only do they lose money from disputed sales, but they also incur chargeback fees and potentially higher processing rates. Credit card processors may even drop retailers that have too many chargebacks.
Do chargebacks ever get denied?
Chargebacks are often denied because cardholders don't provide enough evidence. Sometimes, 34% of chargebacks involve fraudulent transactions [1]. This shows how important it is to back up your claim with solid proof. Banks and issuers need evidence to confirm that disputes are valid.
What is the 2/3/4 rule for credit cards?
The 2-3-4 rule is a guideline, primarily associated with Bank of America, that limits how many new credit cards you can be approved for: 2 new cards in 30 days, 3 in 12 months, and 4 in 24 months, helping manage application frequency and hard inquiries to protect your credit score. It's not a universal policy but reflects a strategy to space out credit card applications, with other issuers having similar, though often unwritten, rules like the 5/24 Rule.
What is the biggest killer of credit scores?
The single biggest thing that hurts your credit score is late payments, especially those 30+ days past due, as payment history accounts for 35% of a FICO score; maxing out credit cards (high credit utilization) and opening too many new accounts quickly also cause significant damage, while major negative events like bankruptcy are devastating.
What is a valid reason for a chargeback?
The most common reasons for chargebacks
Fraud—Someone unauthorised to use the card made the disputed charge. “Friendly Fraud”—When someone disputes a charge they think is fraudulent but actually isn't.
Will the merchant know if I dispute a charge?
Merchants won't know about a dispute until they receive a notification from their acquiring bank—the bank they use to settle payments.
Can a bank refuse to do a chargeback?
If the merchant cannot provide sufficient evidence, the bank may reverse the transaction and debit the merchant's account. Banks can refuse a chargeback if they find the transaction valid or if the cardholder did not follow proper dispute procedures.