A chargeback is one of the most expensive and misunderstood events in online payments. Many merchants only ask “what is a chargeback?” after they’ve already lost revenue, paid dispute fees, and seen their risk metrics deteriorate.
This article explains:
- What a chargeback actually is from the card networks’ perspective
- How chargebacks work on Stripe
- Why fraud chargebacks usually originate from configuration gaps
- How to reduce chargebacks before they happen
What Is a Chargeback?
A chargeback is a payment reversal initiated by the cardholder’s issuing bank, not by the merchant and not by Stripe.
It typically happens when a cardholder:
- Claims the transaction was unauthorized
- Doesn’t recognize the charge
- Escalates a product or service complaint to their bank
From Visa and Mastercard’s perspective, chargebacks exist to protect consumers. From a merchant’s perspective, they are a forced dispute process with financial and operational consequences.
Once a chargeback is filed, the disputed amount is immediately withdrawn from your Stripe balance while the dispute is reviewed.
How Chargebacks Work on Stripe
On Stripe, the chargeback lifecycle looks like this:
- The cardholder disputes a charge with their bank
- The issuing bank files a chargeback via the card network
- Stripe notifies you and temporarily debits the funds
- You may submit evidence through the Stripe Dashboard
- The issuing bank decides the outcome
Stripe provides tooling to manage disputes, but Stripe does not control the final decision — the issuer does.
Official Stripe documentation on disputes and chargebacks:
👉 https://docs.stripe.com/disputes
Types of Chargebacks You’ll See
1. Fraud / Unauthorized Chargebacks
The cardholder claims:
“I didn’t make this purchase.”
These are the most damaging because:
- You usually lose without 3D Secure liability shift
- They directly increase your fraud rate
- They can trigger monitoring programs or account restrictions
Fraud chargebacks often originate from transactions where:
- CVC verification failed
- ZIP / AVS checks failed
- 3DS was not required
This is rarely random — it’s usually a Radar configuration issue.
2. Unrecognized Charges
The customer made the purchase but doesn’t recognize:
- Your business name
- The statement descriptor
- The timing of the charge
Even though these are not always fraud, they still count as chargebacks.
3. Product or Service Disputes
Examples include:
- “Item not received”
- “Not as described”
- “Subscription cancellation issues”
Once escalated to the bank, these disputes follow the same chargeback process as fraud.
Why Chargebacks Are So Costly
A chargeback costs far more than the transaction amount.
Real costs include:
- Lost revenue
- Stripe dispute fees
- Time spent preparing evidence
- Increased fraud and dispute ratios
- Higher risk of account restrictions
Stripe may take action if your dispute rate becomes excessive, including rolling reserves or account limitations.
Preventing chargebacks is significantly cheaper than fighting them.
The Hidden Reality: Many Chargebacks Start as “Approved” Payments
Here’s the part most merchants miss.
A payment can be:
- Authorized by the bank
- Successfully captured on Stripe
- Later charged back as fraud
Why?
Because authorization approval ≠ fraud prevention.
If your Stripe Radar rules allow payments where:
- CVC or AVS fails
- Risk score is elevated
- 3DS is skipped
You are implicitly accepting fraud risk — even if you didn’t realize it.
This is explained in detail here:
👉 Why Stripe Radar Still Lets Fraud Through
Official Stripe Radar documentation:
👉 https://docs.stripe.com/radar
Chargebacks, 3DS, and Liability Shift
3D Secure (3DS) is one of the most effective tools for reducing fraud-related chargebacks.
When a transaction is successfully authenticated with 3DS:
- Liability for most fraud disputes shifts to the issuer
- You are protected even if a chargeback occurs
Stripe integrates 3DS natively and applies it based on:
- Regulatory requirements (e.g. SCA in the EEA)
- Risk signals
- Radar rules
Stripe’s 3DS documentation:
👉 https://docs.stripe.com/payments/3d-secure
Understanding how CVC, AVS, and 3DS interact is critical:
👉 CVC, AVS, and 3DS Explained — and Why They’re Not Enough
Why Fighting Chargebacks Is the Wrong Strategy
Optimizing dispute evidence helps, but it’s reactive.
The biggest reductions in chargebacks come from stopping risky transactions before they settle, by:
- Blocking or challenging failed CVC / ZIP checks
- Applying 3DS to mid-risk traffic
- Blocking high-risk patterns early
To do that effectively, you need to know which risky approvals are already happening in your account.
How GhostAudit Helps Reduce Chargebacks
GhostAudit analyzes your historical Stripe transactions to identify Ghost Transactions — approved payments that failed important verification checks.
It helps you:
- See how many approved payments failed CVC or AVS
- Identify patterns that frequently lead to disputes
- Tune Stripe Radar rules based on your real payment data
Instead of discovering chargebacks after the damage is done, you fix the root causes first.
Want to See Which Approved Payments Are Likely to Become Chargebacks?
GhostAudit scans your Stripe history and shows you where fraud risk is slipping through — before it turns into disputes, fees, or account risk.
