Frequently Occurring Causes of Credit Card Chargebacks and How to Prevent Them

In today’s digital age, credit card transactions have become a cornerstone of commerce. However, alongside the convenience of electronic payments comes the risk of chargebacks. Chargebacks occur when customers dispute a trade with their card issuer, leading to funds being reversed from the merchant’s account. While some chargebacks are legitimate due to fraud or poor service, others arise from misunderstandings or merchant errors. Understanding the common causes of credit card chargebacks and implementing preventive measures can help businesses protect their online payment methods in Malaysia.

1. Fraudulent Transactions:

Fraud remains a significant cause of chargebacks. Cybercriminals exploit stolen card information to make unauthorised purchases, leaving customers and merchants in a dilemma. To prevent this, merchants should implement robust fraud detection tools that analyse transaction data for unusual patterns. 

2. Dissatisfaction with Product or Service:

Customers may dispute a charge if unsatisfied with a product or service. To prevent this, merchants must ensure accurate product descriptions, display clear return and refund policies, and promptly address customer concerns. Open lines of communication can often resolve disputes before they escalate to chargebacks.

3. Technical Glitches and Processing Errors:

Technical glitches and processing errors, such as duplicate charges or incorrect amounts, can result in chargebacks. Merchants should regularly test their payment systems, perform reconciliations, and promptly rectify mistakes. Providing customers with easily accessible customer support can help them resolve issues without initiating chargebacks.

4. Subscription Billing Issues:

Subscription-based businesses often face chargebacks when customers need to remember about recurring charges or are unaware of their terms. To prevent this, merchants should ensure transparency regarding billing frequency and amounts. Sending advance notifications before payments can help customers manage their subscriptions and reduce chargeback disputes.

5. Non-Delivery of Goods:

Customers who don’t receive the purchased goods might dispute the charge. Merchants should provide accurate tracking information and ensure timely deliveries. Offering easy tracking options and prompt customer service through Malaysia’s online payment gateway can prevent misunderstandings and subsequent chargebacks.

6. Unclear Merchant Descriptors:

Due to unclear merchant descriptors, customers may need to recognize a charge on their statement. This can lead them to initiate chargebacks assuming the transaction is fraudulent. Merchants should use recognizable descriptors that indicate the nature of the purchase and their business name.

7. Friendly Fraud:

Friendly fraud occurs when customers knowingly purchase but later claim they didn’t authorise it. To counter this, merchants should keep detailed records of transactions and communication with customers. In cases of friendly fraud, presenting evidence to the card issuer can help dispute the chargeback.

8. Cardholder Disputes:

Sometimes, chargebacks arise due to genuine misunderstandings or discrepancies between the transaction and the customer’s memory. Maintaining precise records of transactions, providing receipts, and offering timely communication can help resolve disputes before they escalate.

9. Complicated Refund Processes:

Complex or confusing refund processes can frustrate customers and lead them to initiate chargebacks. Merchants should simplify their refund procedures, making it easy for customers to request refunds without resorting to chargebacks.

10. Inadequate Customer Support:

A lack of responsive customer support can drive customers to take drastic measures like initiating chargebacks. Offering timely and effective customer support channels can resolve concerns and prevent chargeback disputes.

In conclusion, a business’s online merchant payment gateway mechanism can significantly impact chargebacks. However, understanding the common causes of chargebacks and taking proactive measures can substantially reduce their occurrence. By implementing robust fraud prevention systems, enhancing customer service, and maintaining transparency, businesses can create an environment where chargebacks are minimised, and both merchants and customers benefit from a seamless transaction experience. It’s a collaborative effort that ensures the integrity of electronic payments and sustains the trust that underpins modern commerce.

Related Post

Leave a Comment

Mobi (formerly known as Mobiversa) was established in 2014 to provide new-age, secure, innovative payment gateway solutions in Malaysia for big and small businesses. Having started with an eWallet Payment Gateway, we are now focusing on B2B payments for online transactions.

Our cutting-edge payment solutions create value for businesses of all sizes by providing easy-to-use payment methods to their customers. Also, we are the first Cashless Payment System In Malaysia to introduce next-day settlements.

Having started in Malaysia, we now have our innovation center in India as well. We also have a strategic office in Singapore to fuel our growth in the rest of Southeast Asia’s eCommerce Payment Gateway industry. Currently, we are expanding our services into Indonesia.

Download our App from