As e-commerce continues to boom, chargebacks have unfortunately become an everyday headache for Shopify store owners. In fact, chargeback rates across e-commerce saw a shocking 222% increase year-over-year in Q1 2025. With the average chargeback now hitting $374.01, these disputes aren’t just annoying—they’re seriously threatening your bottom line.
In this guide, I’ll walk you through everything you need to know about managing chargebacks on your Shopify store. From understanding how Shopify calculates chargeback rates to implementing proven prevention strategies, you’ll learn practical steps to protect your business and keep more of your hard-earned money.
Understanding Chargebacks on Shopify Payments
Before diving into management strategies, it’s important to understand exactly what a chargeback is in the Shopify ecosystem.
A chargeback occurs when a customer disputes a transaction directly with their bank or credit card company instead of requesting a refund from you. When this happens, the bank pulls the funds from your account while they investigate the claim.
How Shopify Calculates Your Chargeback Rate
Shopify measures your chargeback rate by dividing the number of orders that result in chargebacks by your total order count. This simple formula creates a percentage that has major implications for your business:
Chargeback Rate = (Number of Chargebacks ÷ Total Number of Orders) × 100
While Shopify doesn’t publicly share their exact threshold for Shopify Payments, industry standards suggest that rates above 1% can trigger high-risk merchant restrictions. This could mean:
- Holds on your funds
- Higher processing fees
- Or in worst cases, termination of your Shopify Payments account
The Costly Reality of Chargebacks
When a chargeback hits your Shopify store, you’re facing more than just a lost sale:
- Shopify Payments charges a $15 fee per chargeback (refundable only if you win the dispute)
- Both the chargeback amount and fees are deducted from your next payout
- You lose the merchandise and shipping costs
- Your store’s reputation with payment processors takes a hit
The Shopify Chargeback Dispute Process Explained
When a customer initiates a chargeback, you’ll receive a notification from Shopify. This begins a time-sensitive process where every day counts.
Step-by-Step Chargeback Resolution on Shopify
- Notification Stage: You’ll receive an email and dashboard alert about the chargeback
- Evidence Collection: Gather proof to support your case (more on this below)
- Response Submission: Submit your evidence through the Shopify dashboard
- Waiting Period: Card networks review both sides of the dispute
- Resolution: You’ll be notified whether you won or lost the dispute
Critical Time Limits for Disputing Chargebacks
Different card providers have different response windows:
- Visa: 20 days
- Mastercard: 45 days
- American Express: 20 days
- Discover: 20 days
Missing these deadlines means an automatic loss, so I recommend setting reminders to respond within the first week of receiving any chargeback notification.
7 Proven Shopify Chargeback Prevention Strategies
The best way to deal with chargebacks is to prevent them from happening in the first place. Here are seven strategies I’ve found most effective:
1. Use Clear Billing Descriptors
Make sure customers instantly recognize your charges on their statements. Include your store name and website or phone number in your payment descriptor to reduce “unrecognized charge” disputes.
2. Create Detailed Product Descriptions
Be crystal clear about what customers are buying. Include:
- Accurate photos from multiple angles
- Precise measurements and specifications
- Realistic delivery timeframes
- All potential fees upfront
3. Implement Robust Fraud Prevention
Shopify offers built-in fraud analysis tools that can identify suspicious orders before they become chargebacks:
- Enable Shopify’s fraud analysis
- Consider third-party fraud prevention apps for enhanced protection
- Set up manual review thresholds for high-value orders
4. Optimize Your Fulfillment Process
Many chargebacks stem from delivery issues:
- Use reliable shipping carriers
- Provide tracking numbers for all orders
- Send shipping notifications automatically
- Consider signature confirmation for expensive items
5. Prioritize Customer Service
Make it easier for customers to contact you than their bank:
- Display contact information prominently
- Respond to inquiries within 24 hours
- Offer hassle-free returns and refunds
- Create a FAQ section addressing common issues
6. Document Everything
Create a paper trail for every transaction:
- Save all customer communications
- Keep detailed order and shipping records
- Document your policies and make them visible
- Take screenshots of completed transactions
7. Set Up Chargeback Alerts
Several services can notify you the moment a customer initiates a dispute, giving you extra time to:
- Reach out to the customer directly
- Issue a refund before the chargeback finalizes
- Prepare your evidence for disputing the claim
Effective Shopify Chargeback Dispute Resolution
Despite your best prevention efforts, chargebacks will still happen. When they do, here’s how to maximize your chances of winning the dispute:
Essential Evidence for Winning Chargeback Disputes
The strongest cases include:
- Order details (product, price, date)
- Proof of delivery (tracking information, delivery confirmation)
- Communication history with the customer
- Your clearly stated policies that the customer agreed to
- Evidence that the product or service was as described
Using Chargeback Analytics on Shopify
Tracking patterns in your chargebacks can reveal underlying issues:
- Monitor which products have higher chargeback rates
- Identify common reasons for disputes
- Look for patterns in customer demographics or locations
- Track your dispute win rate to measure improvement
Tools for Managing Chargebacks on Shopify
Shopify offers built-in tools for basic chargeback management, but third-party solutions can provide more comprehensive protection:
Native Shopify Chargeback Solutions
- Shopify Payments dashboard for tracking disputes
- Basic fraud analysis tools
- Manual review settings for suspicious orders
Third-Party Chargeback Management Software
Consider these popular options that integrate with Shopify:
- Chargeflow
- Chargeback Gurus
- Signifyd
- Kount
- ChargebackHit
These platforms offer automated responses, improved analytics, and AI-powered fraud detection that can significantly reduce your chargeback rates.
Reducing Your Shopify Chargeback Rate: A Success Story
I worked with a client whose Shopify store was hitting a dangerous 1.2% chargeback rate, putting their payment processing at risk. By implementing the strategies in this guide, we brought their rate down to 0.3% within three months.
The most impactful changes were:
- Adding a pre-shipment confirmation email with clear product details
- Extending customer service hours to cover evenings and weekends
- Implementing a 3D Secure authentication for high-value purchases
- Creating a streamlined return process that was easier than filing a chargeback
These simple adjustments saved them thousands in chargeback fees and protected their status with payment processors.
Chargebacks may be an inevitable part of running a Shopify store, but they don’t have to derail your business. By understanding how the chargeback process works, implementing strong prevention strategies, and knowing how to effectively dispute invalid claims, you can keep your chargeback rate well below dangerous thresholds.
Remember that chargeback management isn’t a one-time fix but an ongoing process. Keep monitoring your metrics, refining your approaches, and staying current with best practices as the e-commerce landscape evolves.
Have you implemented any successful chargeback prevention strategies in your Shopify store? I’d love to hear what’s working for you in the comments below!