Written or reviewed by Libby James, founder of Merchant Advice Service and specialist in merchant payments and complex provider requirements.
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A chargeback is not simply a refund that the merchant did not agree to.
It is a card-scheme dispute process that can allow a cardholder's bank to challenge a transaction and potentially recover the payment through the card-payment chain.
For merchants, occasional legitimate disputes are part of accepting cards.
The problem begins when chargebacks become frequent, poorly understood or concentrated around the same underlying issue.
At that point, chargebacks can affect more than the individual transaction.
They can influence:
The most useful question is therefore not:
“How do we win more chargebacks?”
It is:
“Why are customers disputing these transactions, which disputes could have been prevented, and what needs to change in the payment or customer journey?”
This guide explains how UK merchants can reduce chargebacks, analyse root causes, improve dispute evidence and understand when chargeback performance starts to become a wider payment-risk issue.
A chargeback occurs when a card transaction is disputed through the customer's card issuer and the transaction is challenged through the relevant card-scheme process.
GOV.UK gives common examples including:
Read GOV.UK guidance on disputed card payments.
The Financial Ombudsman Service also identifies examples including:
See Financial Ombudsman guidance on chargebacks.
| Refund | Chargeback |
|---|---|
| Normally initiated by the merchant | Initiated through the cardholder's issuer |
| Merchant agrees to return some or all of the transaction | Transaction is disputed through card-scheme procedures |
| Usually handled within the merchant's normal payment/refund process | Can involve the issuer, scheme, acquirer/PSP and merchant |
| Can resolve a customer problem before it becomes a dispute | Can create additional fees, operational work and risk monitoring |
That does not mean merchants should automatically refund every unhappy customer.
It means a good refund and complaints process can prevent situations where customers feel their only remaining option is to contact their bank.
Chargeback and Section 75 are also different.
Chargeback operates through card-scheme rules and can apply to debit and credit-card transactions in relevant circumstances.
Section 75 of the Consumer Credit Act 1974 is a statutory consumer protection applying to qualifying credit arrangements.
The Financial Ombudsman explains that the two routes have different legal and procedural bases.
Read the Financial Ombudsman's explanation of Section 75 and chargeback.
A merchant should not assume that because it successfully defended a chargeback, every other consumer remedy has disappeared.
Card-scheme disputes, consumer rights and Section 75 can involve different processes.
The reason given to the card scheme is useful, but the underlying business cause may be different.
We would normally group chargebacks into several broader areas.
The cardholder says they did not authorise the transaction.
This may involve:
The customer may genuinely have made the purchase but does not recognise the merchant descriptor appearing on the card statement.
This can happen where:
The customer may claim:
The customer paid but says the product or service was not delivered.
This can be particularly important for:
The merchant agrees a refund but:
Common issues include:
These can include:
It is tempting to run a report showing:
Fraud = 40%
Goods not received = 30%
Other = 30%
and stop there.
That is not enough.
A merchant should ask what operational behaviour sits underneath each category.
| Chargeback pattern | Possible underlying issue |
|---|---|
| High unrecognised transactions | Poor billing descriptor or customer communication |
| High non-delivery disputes | Fulfilment delays, poor tracking or unrealistic delivery promises |
| High recurring-payment disputes | Weak subscription disclosure or cancellation journey |
| High fraud | Weak fraud controls, card testing or account takeover |
| High refund-related disputes | Slow refund process or poor customer-service communication |
| High product-quality disputes | Product, advertising or fulfilment issue rather than payment technology |
If the merchant only fights chargebacks after they arrive, it is treating the symptom rather than the cause.
The term friendly fraud is commonly used when a cardholder disputes a transaction they may actually have authorised or benefited from.
This is sometimes also described as first-party misuse.
Examples can include a customer who:
However, merchants should be careful not to label every customer complaint as friendly fraud.
A genuine service, fulfilment or cancellation problem is not solved by blaming the customer.
The precise process depends on the card scheme, reason and transaction.
At a high level:
Merchants should follow the deadlines and evidence requirements supplied by their acquirer or PSP.
Missing a response deadline can remove the opportunity to challenge an otherwise defendable dispute.
There is no single timeframe that safely describes every chargeback scenario.
GOV.UK states that a merchant can potentially be charged back up to 120 days after a transaction is debited or after the date on which goods or services were due to be received.
However, card-scheme rules contain transaction-specific conditions and timeframes.
See GOV.UK chargeback guidance.
Businesses with long future-delivery periods should therefore avoid assuming that their dispute exposure ends shortly after the customer pays.
The useful evidence depends on the reason for the dispute.
| Dispute type | Potentially useful evidence |
|---|---|
| Goods not received | Tracking, proof of delivery, customer correspondence, delivery address |
| Service not provided | Booking records, service logs, customer confirmation, usage evidence |
| Subscription cancelled | Terms accepted, cancellation records, billing notifications, usage |
| Transaction not recognised | Descriptor information, order details, IP/device data, customer account history |
| Refund not processed | Refund transaction reference and processing date |
| Duplicate transaction | Separate invoices/orders or evidence that one payment was reversed |
| Product not as described | Product page, order details, correspondence, returns history |
| Fraud dispute | Authentication and transaction evidence where relevant under scheme rules |
The Financial Ombudsman notes the importance of evidence such as invoices, correspondence, photographs, contract terms and chargeback submissions when considering disputed transactions.
See Financial Ombudsman dispute evidence guidance.
A 50-page PDF does not necessarily make a strong dispute response.
The evidence should answer the actual reason for the chargeback.
A good response is usually:
Businesses should avoid manufacturing evidence after a dispute arrives.
The strongest evidence is usually the information the business was already capturing correctly.
No.
Merchants should assess whether the dispute is genuinely defendable.
It may not make commercial sense to contest a dispute where:
Equally, automatically accepting every chargeback can create its own problems if legitimate transactions are repeatedly disputed.
The merchant needs a consistent decision process.
For each meaningful group of disputes, ask six questions.
Was the customer or authorised user likely responsible for the payment?
Could the descriptor, price, subscription or product have caused confusion?
Check fulfilment, timing, quality and customer communication.
Was a refund, cancellation or complaint left unresolved long enough for the customer to go to their bank?
Could the business prove what happened if the issuer asks?
One dispute can be noise.
Fifty similar disputes can be a business-process failure.
The objective is not zero chargebacks at any cost. It is to remove preventable disputes and understand the remaining risk.
Fraud prevention needs to match the merchant's payment channel and risk profile.
Controls can include:
The right strategy balances fraud reduction with payment acceptance and customer friction.
Blocking every transaction that looks slightly unusual can reduce fraud while also declining genuine customers.
3D Secure can provide authentication evidence and can affect liability for certain fraud-related disputes where the relevant rules are satisfied.
But it does not solve:
A merchant with excellent 3D Secure coverage can therefore still have a serious chargeback problem.
A customer who sees an unfamiliar name on their bank statement may assume the payment is fraudulent.
Review:
For groups with several brands, the technically correct legal descriptor may still create customer confusion if the trading relationship is not obvious.
Many disputes begin as ordinary customer-service issues.
The customer:
If contacting the merchant is difficult, the customer's bank can become the easiest route.
Businesses should review:
If a refund has been agreed, tell the customer:
A customer who believes a refund has disappeared may dispute the original transaction unnecessarily.
Recurring-payment merchants should pay particular attention to:
A cancellation journey designed purely to make leaving difficult can create more disputes rather than improve retention.
For the payment architecture itself, see our Subscription Payment Processing guide.
For a merchant delivering immediately, the risk period can be relatively short.
For a business taking payment months in advance, the picture changes.
Examples include:
These merchants should monitor:
High future-delivery exposure can also influence underwriting, reserves and settlement even where current chargeback levels remain manageable.
A business receiving ten £10,000 chargebacks has a different commercial problem from a merchant receiving one hundred £20 chargebacks.
Do not look only at dispute count.
Track:
The phrase chargeback ratio can mean different things depending on the scheme, provider or internal merchant calculation.
A merchant might internally calculate:
number of chargebacks ÷ number of transactions
or:
chargeback value ÷ processed value.
But card-scheme monitoring programmes can use their own definitions, timing and eligibility rules.
This distinction has become particularly important under Visa's current VAMP framework.
Visa's Acquirer Monitoring Program, or VAMP, combines relevant card-not-present fraud and disputes within a single core count-based ratio.
Visa publishes the core calculation as:
Count of relevant fraud + disputes ÷ count of settled transactions.
Visa states that certain disputes resolved through qualifying pre-dispute solutions and certain fraud qualified for Compelling Evidence 3.0 can be excluded, subject to the programme conditions and timing.
From 1 April 2026, Visa's published Excessive Merchant VAMP threshold for the EU, AP, Canada and US was reduced to 150 basis points.
Visa's fact sheet also sets a minimum monthly count of 1,500 fraud and disputes for the relevant AP, Canada, EU and US excessive-merchant threshold, and explains how individual merchant thresholds interact with acquirer-level monitoring.
Read Visa's current VAMP fact sheet.
The key commercial lesson is:
Do not manage disputes separately from fraud.
A merchant should know both.
For the specialist rules, see our VAMP guidance for high-risk merchants.
Mastercard also operates monitoring programmes relevant to excessive chargebacks and fraud.
Its published merchant compliance information includes:
See Mastercard's current merchant rules and compliance programmes.
Mastercard also publishes a current Chargeback Guide — Merchant Edition covering dispute rules and processes.
Because scheme rules change, merchants approaching programme thresholds should confirm the current position with their acquirer or processor rather than relying on an old percentage copied from an historic article.
Mastercard's Scam Merchant Monitoring Program is a separate risk programme focused on potentially scam-related merchant activity.
It should not be treated as another name for the Excessive Chargeback Program.
However, disputes, refunds, complaints and merchant behaviour can all form part of the wider risk picture for a payment provider.
See our dedicated Mastercard SMMP Rules 2026 guide.
Depending on the merchant, provider and scheme position, possible outcomes can include:
The exact response is provider- and scheme-specific.
A merchant should therefore act before a threshold breach rather than after an urgent provider notice arrives.
A reserve protects the acquiring/provider side against potential future merchant liabilities.
It does not fix the reason customers are disputing transactions.
If a provider introduces a reserve because chargebacks have increased, the merchant has two separate problems:
Negotiating the reserve without addressing the chargebacks is unlikely to be a complete solution.
Not automatically.
If the merchant's own customer journey is causing the disputes, moving to another acquirer does not remove that problem.
However, a provider review may become relevant where:
If the provider itself is under review, see our Payment Gateways for High-Risk Merchants guide.
Act quickly, but do not immediately submit applications everywhere.
Know current fraud, chargeback count, value, ratios and scheme-monitoring position.
Break disputes down by reason, product, channel, country, fulfilment and customer cohort.
Ask whether the issue relates to:
Document what the business is changing and how success will be measured.
If provider appetite has genuinely changed, identify alternative routes before processing is interrupted.
See our guide to Terminated Merchant Facilities.
A useful plan should be specific.
For example:
| Problem | Action | Measure |
|---|---|---|
| Unrecognised descriptor | Change descriptor and confirmation emails | Reduction in unrecognised-payment disputes |
| Slow refunds | Automate refund approval and customer notifications | Refund completion time |
| Delivery disputes | Add tracked delivery and proactive delay communication | Non-delivery dispute rate |
| Subscription cancellations | Simplify cancellation and renewal communication | Recurring-payment dispute rate |
| Fraud | Adjust fraud controls and authentication | Fraud rate and authorisation impact |
| Card testing | Add velocity and bot/card-testing controls | Enumeration/attempt patterns |
A remediation plan should demonstrate that the merchant understands the underlying cause rather than simply promising that chargebacks will fall.
Some payment ecosystems support alert or pre-dispute services that allow certain customer disputes to be identified before they become conventional chargebacks.
Depending on the scheme, provider and programme, this can allow the merchant to:
They are not a substitute for solving the root cause.
Visa's current VAMP methodology specifically notes that qualifying disputes resolved through pre-dispute solutions can be excluded from the VAMP ratio, subject to timing and programme conditions.
When comparing gateways and payment providers, ask whether the system allows the merchant to understand:
The objective should be analysis, not simply administration.
For a merchant processing substantial transaction volume, individual dispute management is not enough.
Build reporting around:
This makes it possible to distinguish:
“Our chargebacks are high”
from:
“80% of the increase comes from one product sold to one customer cohort using one payment journey.”
The second statement is actionable.
For broader enterprise payment analysis, see our High-Volume Merchant Processing guide.
A fraud rule that blocks more transactions may reduce fraud disputes while also rejecting good customers.
That can damage revenue.
High-volume ecommerce businesses should therefore consider:
as connected metrics.
See our Enterprise Payment Authorisation Rates guide.
A provider review may make sense if:
The merchant should still understand whether the issue is genuinely provider-related before switching.
When chargebacks are affecting a merchant's payment position, we would normally look at five areas.
How many disputes are occurring, what are they worth and how is the trend changing?
Are disputes being caused primarily by fraud, fulfilment, refunds, subscriptions, descriptors, customer service or another issue?
Is the merchant approaching a card-scheme monitoring threshold or the provider's own risk tolerance?
What can the merchant change operationally, technically or commercially to reduce future disputes?
Can the incumbent continue supporting the business, or is a specialist/alternative acquiring route genuinely required?
A chargeback problem should be diagnosed before it becomes a merchant-account problem.
| Area | Information |
|---|---|
| Processing | Monthly transaction count and value |
| Disputes | Chargeback count and value |
| Fraud | Fraud reports and trends |
| Reasons | Chargeback reason categories/codes |
| Products | Products/services generating disputes |
| Countries | Customer and issuer geography |
| Fulfilment | Payment-to-delivery timeframe |
| Refunds | Refund rate and average completion time |
| Subscriptions | Cancellation, renewals and recurring disputes |
| Fraud controls | 3DS, fraud rules, card-testing protection |
| Evidence | Representment evidence and success |
| Provider | Current warnings, reserves and settlement terms |
Merchant Advice Service is not a chargeback arbitrator and does not decide card-scheme disputes.
Our role becomes relevant where chargeback performance is affecting the merchant's wider payment requirements.
This can include businesses that:
Before considering another provider, we try to understand the chargeback issue and whether changing processor actually addresses it.
The selected payment provider remains responsible for underwriting, scheme compliance, pricing, reserves and final merchant acceptance.
For more about our approach, see How Merchant Advice Service Works and How MAS Researches and Compares Payment Providers.
UK government guidance covering common reasons for chargebacks and merchant liability for disputed card transactions.
GOV.UK disputed card payment guidance
Guidance explaining chargebacks, common dispute situations and how merchant/acquirer disputes can be assessed.
Financial Ombudsman disputed transactions guidance
Guidance explaining the distinction between card-scheme chargebacks and Section 75 consumer protection.
Financial Ombudsman Section 75 and chargeback guidance
Visa's current published VAMP framework covering relevant fraud, disputes, enumeration and programme thresholds.
Visa's explanation of the current programme and its approach to fraud and dispute monitoring.
Mastercard's current merchant resources, including its Chargeback Guide and information on the Excessive Chargeback and Excessive Fraud Merchant programmes.
Mastercard merchant rules and compliance programmes
Merchant Advice Service is an independent payments information, comparison and provider-matching service.
MAS may receive commission or a referral fee from some payment providers where a business chooses to proceed following an introduction. This does not determine the factual information, chargeback guidance or provider-selection principles included in this article.
Merchant Advice Service is not Visa, Mastercard, a card issuer, acquiring bank or card-scheme dispute arbitrator.
Chargeback rights, reason codes, evidence requirements, response deadlines and outcomes are governed by the relevant payment provider, card scheme and circumstances of the transaction and can change.
References to Visa and Mastercard monitoring programmes describe current published scheme information and should not be treated as a calculation of an individual merchant's programme status.
Merchants concerned about a scheme-monitoring threshold should confirm current figures and requirements with their acquirer or payment processor.
Chargeback-prevention tools, 3D Secure, fraud systems and dispute-management services cannot guarantee that a transaction will not be disputed or that a merchant will win a representment.
Merchant Advice Service does not guarantee payment-provider acceptance, continued processing, reserve removal or a particular chargeback outcome.
Card-scheme and regulatory information last checked: 26 August 2026
Article last reviewed: August 2026
This guide provides general payment information and should not be treated as legal, regulatory, financial or card-scheme dispute advice.
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Libby James is the founder and Managing Director of Merchant Advice Service. Since 2016, she has worked directly with businesses and payment providers across merchant accounts, card processing, payment gateways and complex provider requirements.
Libby specialises in high-risk, declined and harder-to-place merchants, as well as businesses requiring specialist payment methods, integrations or international support. She writes and reviews Merchant Advice Service content, drawing on practical experience gained from real merchant enquiries and provider relationships.
