Fraud prevention and chargebacks

A transaction that is not authorized by a customer is referred to as fraudulent. Shopify's built-in Risk Analysis brings suspicious orders to your attention so you can investigate further. Follow Shopify's fraud prevention tips to protect yourself from both loss and the cost of chargebacks:

  1. Verify the IP address
  2. Call the phone number on the order
  3. Use a search engine to look up the email address
  4. Verify billing/shipping address match
  5. Multiple orders: same shipping address, different billing addresses
  6. Investigate AVS or CVV verification failures
  7. Pay special attention to high value orders
  8. Use apps for increased protection

Chargebacks

I just received a chargeback notification. What does it mean?

Chargeback clean

A chargeback occurs when one of your customers questions their order with their bank or credit card company. Banks usually ask customers for a reason for the chargeback.

Following the customer’s complaint, most banks tend to initiate a formal chargeback and to side with the customer without further investigation. This can be frustrating, but there is a chargeback resolution process and, in many cases, you can prove that the charge was valid. Shopify will provide you with the chargeback details and work with you to contest any chargebacks that you feel are unjustified.

How does the chargeback process work?

  • Shopify receives a notification of the chargeback. You will receive an email with details and a link to the affected order. A note will also appear on the Orders page, notifying you of the chargeback.

  • Shopify will deduct the chargeback amount and fee from your pending balance. If you win the chargeback, Shopify will add the amount back to your pending balance immediately.

  • On the affected order, a header displays the chargeback details, response deadlines, and instructions on how to best resolve the matter. You can respond to the chargeback using a template generated according to your order, fulfillment, and customer details. You can also include any other details that might help convince the customer’s bank that your products or services were delivered as advertised.

  • Shopify will send any evidence you submit to your customer’s credit card company. That company will then make a decision about whether or not to resolve the chargeback in your favor. The chargeback amount and fee are both refunded to your bank account if the chargeback is resolved in your favor.

  • If you do not take any action on a chargeback, Shopify will automatically submit the pre-generated template on your behalf and attempt to recover the lost sale. To avoid this, you can simply accept the chargeback from the Orders page of the admin.

What should I do when I receive a chargeback notification?

You have four options:

Option 1: Contact the customer

In the affected order you can use the Contact customer link to get in touch with the cardholder to understand the reason for the chargeback. It’s possible that the customer simply did not recognize the transaction. Contacting the customer can often help resolve the issue quickly. If the chargeback is the result of a misunderstanding, the customer can ask their bank to withdraw the chargeback.

Option 2: Respond to the chargeback

To respond to a chargeback, open the affected order in your Shopify admin and click Respond to Chargeback. Enter any additional evidence — aside from what has been automatically generated by Shopify — that the customer did, in fact, receive the product or service within the expected timeframe. Helpful evidence may include:

  • customer service emails
  • USPS/FedEx/UPS or other online tracking or shipping confirmations
  • proof of prior refunds or replacement shipments

Shopify will submit this information to your customer’s credit card company and update you afterwards. Shopify cannot make changes to the response after it has been submitted.

You may only enter text in the dispute response — hyperlinks and images are not delivered.

Option 3: Accept the chargeback

You can choose to accept the chargeback, leaving the sale reversed. This option is available from the Orders page. You should do this if the reason for the chargeback is legitimate, for example, if your products or services were not delivered.

Option 4: Automated recovery attempt

To help you successfully overturn chargebacks, Shopify will automatically respond on your behalf if you do not submit supporting evidence before the chargeback deadline.

The automated response includes:

  • Product details – title, variants, and quantity purchased.
  • Fulfillment information – shipping company used, and tracking information provided.
  • Date and time – date the order was fulfilled.
  • Shipping and billing address – the customer's addresses.
  • Order Date – date the order was placed.
  • Customer IP address and customer IP country - Internet protocol addresses of the customer and his/her country.
  • Customer signature - the customer's signature, if the transaction was made in person.

Caution

To prevent Shopify from automatically responding to a chargeback, you must submit supporting evidence before the deadline found on the order's details page in your Shopify admin. The date shown is the date Shopify will automatically respond. For example:

Chargeback deadline

Is there a fee for chargebacks?

You must pay a fee when there is a chargeback on one of your transactions. If the chargeback is resolved in your favor, then Shopify will refund the fee.

Country Fee
USA and Canada $15
United Kingdom £10
Ireland €15 + 23% VAT
Australia $25

What does the chargeback status mean? How can I tell when it changes?

When a chargeback first comes in, its status is Chargeback: Needs response. When you update the chargeback with evidence, Shopify submits that evidence on your behalf. At some point after that — usually within 3-4 weeks — the chargeback’s status will change to Won or Lost depending on whether the chargeback is resolved in your favor or the cardholder’s favor.

When the chargeback is resolved, Shopify will email you the details of the outcome and update the chargeback status of the affected order.

Can I view all my chargebacks together?

The Orders page allows you to filter all orders with a particular chargeback status. You can look for all chargebacks that are under review by setting the filters to Chargeback status and under review, or you can look for all of your chargebacks by setting the filters to Chargeback status and any. Each chargeback status has a different colored chargeback icon that you can use to tell them apart.

I want to just give the customer a refund instead. Can I do that?

When a chargeback arrives, there is no way for you to refund the charge. Your customer has already received the amount of the chargeback from their bank, so if you agree with the decision to refund, you don’t need to take any further actions.

My customer said the chargeback was a mistake. How do I get the chargeback reversed?

If you’ve talked to your customer and they’ve agreed to drop the chargeback, there are two steps that you need to take. First, have your customer call and tell their bank that they’ve agreed to drop the chargeback. This is critical because the bank won’t know your customer has dropped the chargeback unless your customer tells them.

Second, you need to submit evidence to let the bank know that your customer wishes to drop the chargeback, including any email evidence you have where the customer says so. If your customer had specific complaints that led to the chargeback, be sure to address those complaints in the evidence.

After you’ve completed the two steps, you need to wait for the bank to let Shopify know that the chargeback has been closed in your favor. When the bank confirms this, Shopify will return the full amount of the charge and the associated fee to you. Note that this process can take some time — it’s not unusual for a bank to take eight or more weeks to tell Shopify about the results of the chargeback. As soon as this happens, you will receive an email notification.

What are the most common reasons for a chargeback, and how can I prevent chargebacks?

Chargebacks are an unfortunate fact of accepting credit cards, but you can do a few broad things to reduce your risk:

  • Use a recognizable name for your card statement text. You can set it when you first apply for your Shopify Payments account, or edit it at any time from your Shopify Payments settings. It is recommended that you use your website’s domain name.
  • Have clear return and refund policies and make them easy to find on your website.
  • Communicate accurate delivery times and keep customers updated throughout the process. If possible, use online tracking and delivery confirmation.
  • Post customer service contact information prominently and respond to customer inquiries quickly.

Shopify provides you with more details about the reason for a chargeback (if any are available) at the top of the affected order. A few common reasons make up the bulk of chargebacks:


Fraudulent

What it means: The customer didn’t authorize the charge. This is the most common reason for a chargeback and can happen if the card was lost or stolen. For help responding to chargebacks, here are some great suggestions from the third-party payment gateway, Stripe.

How to prevent it: Make sure your statement descriptor is easily recognizable to your customers and reflects the URL they would associate with their purchase. Send receipts upon payment to remind your customers what they paid for. If you ship physical goods, consider shipping only to AVS-approved addresses (in the US, Canada, and the UK) or reaching out to the customer before shipping to addresses that don’t match the AVS or billing address.

Unrecognized

What it means: The customer doesn’t recognize the merchant name or location on the card statement. Shopify suggests responding to this in the same way that you would to a fraudulent code.

How to prevent it: The prevention measures are similar to those for fraudulent transactions. In particular, make sure your statement descriptor is easily recognizable so your customers can tell who charged them.

Duplicate

What it means: You charged twice for the same product. There are some suggestions here for how to respond to this type of chargeback.

How to prevent it: If a double charge happens accidentally, refund the second charge right away and contact your customer.

Subscription canceled

What it means: According to the customer, you charged for a subscription after it should have been canceled. It can also mean that the customer expected a reminder before each recurring charge but didn’t receive one. Shopify recommends following these guidelines when responding to this type of chargeback.

How to prevent it: Promptly cancel subscriptions upon request and provide your customer with a confirmation of the cancellation. Make it clear on your sign-up page that your customers are agreeing to a recurring charge and include information about whether or not you plan to notify the customer before each recurring charge.

Product not received

What it means: The customer did not receive the goods or services purchased. There are some suggestions here) for how to respond to this type of chargeback.

How to prevent it: Promptly ship the products after collecting payment. Estimate shipping and delivery dates as accurately as you can and communicate clearly with your customer. If shipping delays arise unexpectedly, let your customer know promptly.

Product unacceptable

What it means: The product was received but was defective, damaged, or not as described. Shopify recommends following these guidelines when responding to this type of chargeback.

How to prevent it: Make sure your product descriptions are clear and accurate. If you’re shipping physical goods, ensure that you pack and ship your products in a way that protects them from being damaged in transit. Respond promptly and agree to customer requests for replacing defective or damaged products.

Credit not processed

What it means: The customer informed you that the purchased product was returned or that the transaction with you was canceled, but you have not yet refunded or credited the customer. There are some suggestions here for how to respond to this type of chargeback.

How to prevent it: Have a clear return policy, and make it easy to find. Honor your return/refund policy by issuing refunds promptly.

General

What it means: This type of chargeback, unlike the majority of chargebacks, doesn’t fall under one of the specific categories described.

How to prevent it: The suggestions given for the other chargeback reasons are still likely to be helpful.

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