What is Chargeback Fraud? | Small Business Trends

A chargeback happens when a payment is reversed by the customer’s bank. It’s called chargeback fraud when bad actors cheat this process. Instead of contacting a merchant for a refund, they go right to their financial institution.

There are three types.

  • Criminal Credit Card Fraud Chargebacks. A criminal steals a card and makes purchases. And they try to get money back.
  • Friendly Fraud Claims. The card owner buys something and then files for a chargeback anyway.
  • Merchant Errors. This one happens with a merchant account. They show up on a statement when a customer doesn’t get something they paid for. They happen due to processing errors, accidental duplicate charges, and charges for canceled subscriptions.

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