Chargebacks aren’t just a minor inconvenience – they are a significant threat to the health and profitability of your Shopify store. Today’s digital-commerce-centricity requires understanding and managing chargebacks to protect your business.
Our comprehensive guide explores the multifaceted challenges of chargebacks, from friendly fraud to complex disputes involving stolen credit cards and provides actionable strategies to protect your business. Learn how to leverage advanced AI-driven tools and automation to minimize losses, streamline dispute processes and prepare for the future of eCommerce.
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What Are Chargebacks?
Chargebacks on Shopify happen when customers dispute transactions, leading banks to decide if a refund is required. Beyond financial losses, merchants face fees, labor costs, and the challenge of proving claims. Understanding chargeback causes helps reduce disputes and improve fraud prevention.
Chargeback Costs
Chargebacks cost more than the transaction itself. Merchants lose revenue, pay non-refundable fees, and cover shipping, storage, and labor—turning a $100 dispute into a $200+ loss.
Too many chargebacks can label a business as “high-risk,” leading to higher fees, reserve requirements, or account suspension. Manual disputes also drain resources, shifting focus from growth. Preventing chargebacks helps protect profits and keep operations efficient.
The Main Causes of Chargebacks on Shopify
Chargebacks are a common challenge for Shopify merchants, arising from fraudulent activity, customer misunderstandings and the intentional exploitation of store policies. These disputes result in lost revenue and impose significant operational burdens, including fees, increased labor and potential penalties from payment processors.
The primary causes of chargebacks on Shopify include friendly fraud, return fraud, chargeback fraud, stolen credit card and refund abuse. Each poses unique risks, but they all share a common factor: their ability to erode merchant trust and profitability. By proactively identifying and addressing these sources, businesses can mitigate their impact and safeguard long-term growth.
Frequently Asked Questions
Shopify Pay users can activate Shopify Protect (in the US only). But there are third-party chargeback protection apps available on the Shopify App Store.
A chargeback happens when a cardholder asks their bank, rather than the merchant directly, for a refund of the money they paid for an order. This can be because they don’t recognize the payment, aren’t satisfied with your service, or had their card used without authorization – to list just two examples.
The key to winning chargeback disputes on Shopify is to be always collecting as much data as possible about each transaction, customer, and shipping process. You might need to present evidence such as their IP address, social media profiles, or your email communications to win a dispute, too.
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