To reduce the risk of experiencing Shopify chargebacks and their various adverse consequences, make use of these tips related to chargeback prevention measures. ,
If you’re a merchant running a Shopify store, there’s a high chance you’ve heard of chargebacks. Chargebacks happen when a customer disputes a transaction through their bank. The funds are reversed, and even if the claim isn’t valid, this may result in a Shopify chargeback fee.
While chargebacks are sometimes an inevitable part of e-commerce, too many can damage your revenue and overall business reputation. Beyond the fees, disputes can lead to lost time, extra administrative work, and, in extreme cases, a high chargeback rate can affect your ability to process payments. Understanding what triggers chargebacks, how to prevent them, and how to respond effectively is essential for keeping your customers happy and your Shopify store healthy.
In this article, we break down the causes of chargebacks, essential prevention strategies for online businesses and guidance for handling disputes when they occur.
What causes Chargebacks
There are several common reasons chargebacks may occur;
- Fraudulent or unauthorised purchases
- Shipping or delivery issues
- Inaccurate product descriptions
- Refund disputes
These issues can easily lead to customer dissatisfaction, which is why understanding the causes is the first step towards preventing chargebacks.
Why Chargebacks Matter
Shopify reports that chargebacks cost merchants at least 0.47% of their total revenue each year. That might sound small, but for stores processing thousands of transactions, the impact can quickly begin to build up.
On top of that, there is usually a chargeback fee for each dispute. The good news is that Shopify refunds this fee if you win the case, unlike many other e-commerce platforms that keep the fee regardless of the outcome. Understanding these real costs makes it clear why chargeback prevention and management are essential parts of running a healthy business on Shopify.
How do Chargebacks work
When a customer disputes a payment, Shopify will automatically gather the necessary transaction data from your store and take a payment. You’ll receive a notification in your Shopify admin with the reason for the chargeback, the amount involved, and the deadline for a response.
From there, you can upload supporting evidence such as order confirmations, tracking numbers, and communication history. Shopify then forwards your response to the card issuer for review. If the decision is in your favour, the funds are returned. If not, the payment remains reversed.
This built-in process makes it easier for merchants to manage disputes with ease. If the decision doesn’t go your way, reviewing the case can highlight areas where your processes, communication, or documentation could be improved.
How to Avoid Chargebacks
Understanding the chargeback process is important, and while some are inevitable for any online business, here are some practical steps that merchants can take to reduce the risk.
- Be clear and transparent
Make sure product descriptions, pricing and images are accurate, with clear information about delivery times and return policies for customers during the buying process.
- Keep customers informed about their purchases
Keep your customers informed throughout the purchase journey with order confirmations, tracking details and shipping updates. This will make them far less likely to raise a dispute if something goes wrong.
- Make communication easy
Most chargeback disputes stem from misunderstandings. Make sure your customer service contact details are clearly displayed on your store, and respond quickly to any queries that arise.
- Process refunds quickly
Building trust with your customer can prevent disputes from escalating further. If a customer requests a refund, handle it as soon as possible and remember to send them a confirmation once it’s complete.
- Use fraud prevention tools
Shopify’s built-in fraud analysis flags high-risk orders, and apps like Chargeflow or Signifyd offer added layers of protection by verifying any suspicious transactions.
- Keep detailed records
Save any invoices, shipping confirmations and communications with customers so in the event of a chargeback, you have the documentation ready to help your case.
Key Takeaways
Chargebacks are a normal part of online sales, but high rates can hurt your business. On the bright side, most disputes are preventable through better communication and documentation.
Keeping detailed records and responding promptly to customers throughout the order process lowers your risk of disputes occurring.
With clear policies, open communications and a well-documented transaction history, you’ll not only prevent chargebacks but can help your Shopify store build credibility, strengthen customer trust, and maintain profitability.
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