Shopify chargebacks refer to the bank’s decision to reverse a credit card payment, taking the money out of your account and transferring it back to the cardholder’s account. Customers can use this method to dispute a charge on their credit card bill. Keep in mind that any business accepting credit cards might face the risk of a Shopify chargeback, which can affect your bottom line. Thus, we’ve created this guide on how to avoid chargeback on Shopify with useful tips, tools, and how Shopify chargeback protection can help safeguard your business and support you in winning disputes.
What Is a Chargeback Shopify?
The Shopify chargeback happens when a customer skips talking to you and goes straight to their bank to dispute a charge. Instead of asking you for a refund, they tell their bank something’s wrong with the purchase. The bank then yanks the money from your account and gives it back to the customer while they investigate.
One of the most common reasons customers file chargebacks is claiming they never received their order. Chargebacks for “item not received” or “product never arrived” make up about 26% of all chargebacks, according to statistics from Clearly Payments. This ranks as the second most common chargeback reason, trailing only behind transactions that customers claim are fraudulent or unrecognized.
The worst part? For Shopify merchants, you lose the funds and incur a chargeback fee, usually around $15. which is charged by your payment provider, like Shopify Payments or a third-party processor. Even if you successfully win the dispute, the chargeback fee typically won’t be refunded.
How Does Shopify Chargeback Work?
The typical chargeback process looks like this:
- A customer calls their bank claiming they don’t recognize a charge or that something’s wrong with their purchase
- The bank pulls the money from your account immediately
- You get a notification in your Shopify admin about the dispute
- You decide whether to accept the loss or fight back with evidence
- If you fight, the bank reviews both sides and makes a decision
- The whole process can take 30-90 days to resolve
During this time, the customer already has their money back, while you’re left waiting and hoping for a favorable outcome
Why Does A Chargeback on Shopify Occur?
Any company that accepts credit cards runs the risk of getting a chargeback, and Shopify sellers are no exception.
Shopify chargeback can be started for a number of reasons, including:
- Unreceived item: Customers who expect their orders to arrive at a specific time may request a chargeback during a period of widespread supply chain and shipping delays.
- Clerical error: Double-billing or a wrong charge.
- An unrecognized purchase: If the business name on the card statement differs from the store name, the purchase is frequently unrecognized.
- Customer dissatisfaction: when they get an item that is different from what they paid for.
Did you know 60.9% of cases involve shoppers abusing the system to get goods for free? Fraud occurs when a dishonest customer engages in so-called “friendly fraud,” using their own names, addresses, and credit cards to purchase something online with the intention of disputing the transaction with their credit card provider in order to avoid paying.
Fraud also occurs when a person claims they are a victim of identity theft.
How Shopify Chargeback Can Hurt Your Business?
Chargebacks damage your store in several ways:
- Double loss: You lose both the product and the payment
- Extra fees: Each chargeback costs you about $15 in processing fees
- Cash flow problems: Sudden money withdrawals disrupt your finances
- Wasted time: Gathering evidence and fighting disputes takes hours away from running your business
- Account risk: If your chargeback rate exceeds 1%, payment processors might flag your account as high-risk
One $50 chargeback actually costs you over $200 when you factor in all these expenses.
How to Prevent a Shopify Chargeback?
You can take precautions to prevent chargebacks, but the risk cannot be entirely eliminated. But how can you prevent chargebacks from happening in the first place? To avoid chargebacks and time-consuming questions, follow the following tips:
Shopify Protect – Your built-in fraud defense
Shopify offers a lifeline called Shopify Protect – a Shopify chargeback protection program that covers certain fraud-related chargebacks. Here’s how it works:
When an eligible order gets hit with a fraud chargeback, Shopify immediately reimburses you both the disputed amount and the chargeback fee. You don’t need to submit evidence or do anything – Shopify handles the entire dispute for you.
To qualify for Shopify Protect:
- You must be a US-based merchant using Shopify Payments
- The order must be paid through Shop Pay
- You must ship physical products (not digital goods)
- You must ship within 7 days and provide valid tracking
- You must use major carriers like USPS, UPS, or FedEx
The catch? Shopify Protect only covers chargebacks coded as “fraudulent” or “unrecognized.” It doesn’t cover disputes about product quality, delivery issues, or subscription problems. Still, having protection against fraud disputes (which are often the hardest to win) is incredibly valuable.
Stop Fraud Before It Happens
Pay attention to Shopify’s risk indicators – they’ll flag suspicious orders for you. For high-value orders, verify details by contacting the customer. Always require CVV and address verification for payments.
One jewelry store owner shared: “After we started requiring signature confirmation for orders over $100, our fraud chargebacks dropped by half.”
Fix Your Billing Descriptor
Many customers file chargebacks simply because they don’t recognize your store name on their statement. Make sure your billing descriptor clearly identifies your business. Instead of showing up as “SHOPIFY*1234,” change it to your actual store name.
Use Clear Tracking and Delivery Confirmation
Always provide tracking numbers and use delivery confirmation for every order. For expensive items, require a signature on delivery. Send notification emails when packages arrive so customers can’t claim they never got their order.
Notify Buyers of Valid Tracking Numbers
Keeping customers informed about the status of their orders is key to reducing disputes or chargebacks. This is especially important for both PayPal and Stripe payments, where providing valid tracking numbers can help prevent issues.
If you’re using PayPal or Stripe for payments, you might want to check out Synctrack’s PayPal Tracking Sync for handling tracking numbers. This app basically connects your store to PayPal and makes sure all your tracking numbers get sent over automatically. This is super helpful because when customers claim they never got something, PayPal can see you actually shipped it. Here are the key benefits of Synctrack:
- Faster Fund Release: Providing PayPal and Stripe with the necessary tracking information can expedite the release of your funds, sometimes within 1–3 days, instead of the usual week-long wait.
- Reduced Disputes and Chargebacks: Automatically syncing tracking numbers helps in minimizing disputes and chargebacks, as customers can easily verify their order status.
- Enhanced Seller Protection: Synctrack’s integration with PayPal’s Seller Protection program helps in safeguarding your transactions against unauthorized claims and item not received disputes.
- Multi-Store Management: Manage multiple Shopify stores with a single Synctrack account, streamlining your operations and saving time.
- Support for All Sales Channels: Sync tracking information from various sales channels, including Facebook and Instagram, ensuring consistent communication with your customers.
The best part? It gets your money released faster – sometimes in just a day instead of waiting a week. It works with regular Shopify orders but also handles Facebook and Instagram sales, which can be a real headache otherwise. Manually copying tracking numbers into PayPal is mind-numbing work, so having it happen automatically is a huge time-saver. One less thing to worry about when you’re trying to run a business!
Make Your Policies Crystal Clear
Set realistic expectations about shipping times, returns, and product details. Have an easy-to-find return policy and honor it. For pre-orders or backorders, communicate delays before customers get impatient.
Prioritize Customer Service
Respond quickly to complaints and solve problems before they escalate to chargebacks. Many disputes happen simply because customers couldn’t reach you. Make your contact information easy to find and be willing to offer refunds when appropriate – it’s cheaper than fighting chargebacks.
How to Win Chargeback Disputes
Online shopping continues to grow, and unfortunately, so do chargebacks. Between 2023 and 2024, eCommerce chargeback rates rose by 222%. But you’re not defenseless.
When a chargeback hits, you need to decide whether to accept it or fight back. For small amounts, sometimes it’s not worth the effort. But for significant orders or clear cases of friendly fraud, here’s how to dispute effectively:
1. Act Fast: You typically have 7-10 days to respond. Don’t procrastinate!
2. Gather Strong Evidence: Depending on the dispute reason, collect:
- For fraud claims: IP address logs, AVS match details, previous order history
- For non-delivery claims: Tracking numbers, delivery confirmation screenshots
- For product issues: Photos, detailed descriptions, customer communications
3. Write a Clear Response: Keep it factual and professional. Address the specific reason code with relevant evidence. Make it easy for the reviewer to see key points.
4. Submit Through Shopify: For Shopify Payments, you’ll submit everything through your Shopify admin.
5. Learn From Every Case: Whether you win or lose, use each chargeback as a learning opportunity to improve your business practices.
Most merchants win about 45% of the chargebacks they fight. With strong evidence and a prompt response, you can beat those odds.
Final Words
Chargebacks happen to every Shopify store sooner or later. They’re annoying, but they won’t wreck your business if you’re prepared. Stay on top of fraud, keep good records, and fight back when it makes sense. That way, you can spend your time growing your store instead of constantly worrying about disputes. The more systems you put in place now, the fewer headaches you’ll have down the road.
