What is the most common reason for a chargeback?

Fraud is the most common category, followed by incorrect or duplicate transaction amounts, merchandise not as described, unrecognized transactions, canceled recurring payments, non-delivery, and credits that were never processed. There are more than 50 chargeback reason codes across the major card brands.

How do I prevent chargebacks on a high-risk merchant account?

Use 3D Secure, AVS and CVV checks at the gateway, make your payment descriptor clearly recognizable, publish a fair and visible return and shipping policy, respond to cancellation requests immediately and confirm them in writing, and process refunds promptly to the original payment method.

What chargeback ratio is too high?

As a general rule chargebacks should stay below 2% of all transactions. Exceeding that threshold can lead to account closure, because chargebacks consume substantial resources for the processor and the sponsoring bank.

Understanding Credit Card Chargebacks and How to Prevent Them

By Patrick FelstedCEO, Structure PaymentsJune 10, 2024

High-risk merchant accounts face chargebacks for many reasons. With more than 50 chargeback reason codes across the major card brands, it helps to focus on the disputes that actually happen most — and what prevents each one.

1. Fraud

How to prevent it:

3D Secure — added security for card-not-present and high-risk merchants, developed by Visa and MasterCard.
iSpyFraud — a rules-based fraud prevention tool that screens suspicious transactions before they settle.
Verified by Visa / Mastercard SecureCode — additional authentication layers that shift liability.
Gateway tools — AVS (Address Verification Service) and CVV checks catch a surprising share of fraud at no extra cost.

2. Incorrect amount or duplicate transactions

How to prevent it:

Monitor system errors — identify and fix issues promptly so customers are never double-charged.
Confirm with the customer — contact them directly when you suspect a duplicate order.
Minimize manual processing — manual entry is where most amount errors originate. State your chargeback time limit clearly in your return policy.

3. Not as described or defective merchandise

How to prevent it:

Responsive customer service — short hold times mean customers call you instead of their bank.
Fair return policies — display a clear, fair return policy on your site. Most "not as described" disputes are really refund requests in disguise.

4. Transaction not recognized

How to prevent it:

Clear payment descriptors — your descriptor should include a merchant name the customer will actually recognize on their statement. This single fix removes a meaningful share of disputes.

5. Canceled recurring transaction

How to prevent it:

Cancel promptly — act on cancellation requests immediately.
Confirm in writing — tell the customer the cancellation is processed and when it takes effect.

6. Services not provided or merchandise not received

How to prevent it:

Clear shipping policies — make them visible and keep customers updated on order status.
Communicate proactively — advise customers of delays and offer a cancellation option before they escalate to their bank.

7. Credit not processed

How to prevent it:

Refund promptly — always back to the original payment method.
Set expectations — tell the customer how long the refund will take to appear.

Why this matters for high-risk accounts

Chargebacks should generally stay below 2% of all transactions. Exceeding that can end in account closure, because disputes consume significant resources for both the processor and the sponsoring bank.

Structure Payments includes chargeback alerts and dispute tooling with high-risk merchant accounts so ratios stay manageable. If you are unsure whether your business is classified high-risk, get in touch.