A payment dispute, also known as a chargeback, occurs when a customer contacts their bank or card issuer to contest a charge on their account. While disputes are a consumer protection mechanism designed to safeguard against unauthorized transactions or merchant misconduct, they can be costly and damaging for your business. Proactively working to prevent them is one of the most important things you can do to protect your revenue and maintain a healthy payment processing account.
This guide explains why disputes happen, the serious consequences they carry, and the best practices you can implement to minimize them.
The high cost of payment disputes
Disputes are much more than just a simple refund. They come with a cascade of negative consequences that can significantly impact your business's bottom line and operational stability. It's a situation where, even if you "win," you still lose time and resources.
When a dispute is filed against your Dappr account:
You are charged a non-refundable $15 dispute fee. This fee applies immediately, regardless of whether you win or lose the dispute. This is a direct, unavoidable cost for every single dispute filed.
You risk losing both the revenue and the product. If the dispute is upheld by the card network, the original transaction amount is returned to the customer. In most cases, you are also left without the merchandise you shipped or the value of the service you already provided, resulting in a total loss.
Your access to instant payouts may be reduced or terminated. Payment processors view a high dispute rate as a sign of a high-risk business. This can affect how quickly you can access your funds, potentially tying up your cash flow for longer periods.
Your Dappr account is at risk. A consistently high dispute rate is a violation of our terms of service. To protect our platform and payment partners, this may result in the termination of your ability to process payments through Dappr. This is a worst-case scenario that can cripple a business's ability to operate online.
Understanding why disputes happen
Most disputes fall into one of three categories. Understanding the root cause is the first step to prevention.
Merchant Error: The customer has a legitimate problem. This could be anything from receiving a damaged product or the wrong item, not receiving their order at all, or being billed an incorrect amount. These are often the most preventable disputes.
Customer Confusion or Disagreement ("Friendly Fraud"): This is the most common category. The customer made the purchase but doesn't recognize the charge on their statement, forgot about a recurring subscription, or is experiencing buyer's remorse. Rather than contacting you for a refund, they file a dispute as a shortcut, often without malicious intent.
True Fraud: The purchase was made by a fraudster using a stolen credit card. The legitimate cardholder rightfully disputes the charge because they did not authorize it.
Best practices for preventing disputes
The vast majority of disputes are preventable. By implementing the following best practices, you can protect your business and create a better experience for your customers.
Communicate clearly and proactively
Customer confusion is a leading cause of disputes. The clearer you are at every stage of the transaction, the less likely a customer is to be surprised by a charge.
Use a Recognizable Statement Descriptor: Ensure your business name is clear and easy for customers to recognize on their bank statements. An obscure legal name can easily lead to a "I don't recognize this charge" dispute. If you need to update your statement descriptor, contact our support team.
Send Detailed Order Confirmations: Immediately after a purchase, send an email that includes a receipt, a clear description of what was purchased (including images if possible), the total amount, and your customer service contact information. Dappr makes this process easy. With Dappr Sales, receipts are sent immediately unless turned off or an email address is missing.
Provide Shipping and Tracking Information: For physical goods, send an email with tracking information as soon as the order ships. This reassures the customer that their order is on its way and provides proof of shipment.
Provide excellent and accessible customer service
Make it easier for a customer to contact you than it is for them to contact their bank. A customer with a problem should see you as their first and best option for a resolution.
Display Contact Information Prominently: Your website should have a clear, easy-to-find "Contact Us" or "Help" section with an email address or phone number. Also ensure that you've added a support email and phone number to your company's Dappr account under Settings.
Respond to Inquiries Quickly: Aim to respond to all customer service requests within 24 hours. A quick, helpful, and empathetic response can often resolve an issue before it escalates to a dispute.
Have a Clear Refund and Return Policy: Make your policies easy to understand and find on your website. A straightforward, fair, and easily accessible return process makes customers feel more secure and less likely to resort to a chargeback if they are unhappy with a purchase.
Be honest and transparent
Set accurate expectations to ensure your customers are never disappointed.
Write Accurate Product/Service Descriptions: Ensure your marketing materials, product descriptions, and images accurately represent what the customer will receive. Avoid hyperbole that could lead to a "product not as described" claim.
Be Clear About Shipping Times: Provide realistic estimates for delivery and proactively communicate any delays. A customer who knows their package is delayed is far less likely to assume it's lost and file a dispute.
Clearly Disclose Recurring Charges: For recurring invoices, be transparent about the billing frequency.
By adopting these best practices, you can significantly reduce the likelihood of payment disputes, protecting your revenue and ensuring a long-term, healthy relationship with your payment processor.