Chargebacks in retail are forced refunds initiated by a customer’s bank that pull money directly from your account, often costing retailers far more than the original sale amount. With global chargeback volumes projected to hit 261 million in 2025, rising to 324 million by 2028, they threaten profits, operations, and even your ability to process cards.
What is a chargeback in retail?
A chargeback happens when a customer disputes a card purchase with their issuing bank, which reverses the transaction and debits your merchant account—usually with an extra fee of $15–$25 per case. Unlike standard refunds handled through your store, chargebacks bypass your customer service entirely, giving banks control under card network rules from Visa, Mastercard, or American Express.
The process starts with the customer filing a claim for reasons like fraud, non-delivery or “not as described,” after which the bank credits them temporarily and notifies your acquiring bank. You then have a short window—typically 7–45 days—to submit evidence like proof of delivery or receipts. Without strong proof, the chargeback sticks, and you lose the sale, the goods and the fee.
Why chargebacks happen in retail
Friendly fraud drives most disputes, accounting for around 70–75% of cases where customers dispute legitimate purchases they made themselves, often due to buyer’s remorse, forgotten charges or easier bank refunds. True card-not-present fraud (CNP) makes up about 45%, split between first-party (23%) and third-party (22%) misuse, especially in e-commerce, where no physical card is present.
Merchant errors fuel the rest: 23% for overcharges or duplicates, 18% for late deliveries, and 16% for confusing returns, per recent data. In retail, high-risk categories like apparel (35.81% win rate for merchants) and consumer electronics (16.59%) see the most trouble, while digital goods hold stronger at 72.56%.
The real cost of chargebacks
Each chargeback costs retailers the sale value—averaging $84 in retail—plus processing fees and unreturned inventory, with U.S. merchants losing $4.61 per fraud dollar. Globally, eCommerce chargebacks will hit $33.79 billion in 2025, climbing to $41.69 billion by 2028.
Worse, chargeback ratios above 0.6–1% trigger penalties: higher merchant fees, mandatory monitoring, or account termination by processors. With eCommerce rates up 222% from early 2023, and 72% of merchants seeing friendly fraud spikes, unchecked disputes can cripple cash flow and growth.
How to reduce chargebacks
Start with prevention: Clear product pages, accurate shipping estimates, and visible contact info cut “not as described” claims by 20–30%. Streamline checkouts and mobile experiences to drop disputes by 15–30%, and push Apple Pay or wallets, which reduce chargebacks by 25%. Train staff on ID checks for in-store sales and use EMV chips to shift fraud liability.
Make refunds effortless—52% of customers skip merchants entirely for banks—so visible policies and 24/7 chat divert disputes. Monitor patterns by SKU or channel: if subscriptions spike in 10% of cases, simplify cancellations upfront.
Fighting chargebacks effectively
When disputes hit, win rates soar with organized evidence: tracking, POD signatures, IP logs, and comms history. Apparel merchants win 35.81%, but digital sellers hit 72.56% by providing access. Automate responses with templates matched to reason codes like “Fraudulent” (10.4) or “Item Not Received” (11.3).
Track your chargeback ratio monthly—aim under 0.65% average—and adjust: tweak fraud scores for CNP orders or relabel descriptors so customers recognize charges. Pair with tools like 3D Secure to block 60.9% of abuse upfront.
