What Is a Stripe Chargeback?

A chargeback is a process of reversing funds from the recipient’s account due to the payer’s dissatisfaction over charges on their card. Similarly, a Stripe chargeback is the result of a customer’s dispute, which further allows the bank to direct Stripe to pull the money back from the merchant’s account.

Stripe chargeback occurs if the customer didn’t recognize why someone charged on their card and informs the bank. Here, the Stripe acts as an intervener, reporting the dispute case to the merchant so that they can furnish proper evidence.

However, if there is no evidence and the customer wins the dispute, the merchant will never recover their money. To add more pain to your pocket, you will also lose $15 as Stripe dispute fees.

Are Chargebacks the Same as Disputes?

No, chargebacks and disputes are not the same. A dispute is a buyer’s attempt to get rid of charges on their card. This dispute process revolves around the payer and their bank, raising concerns regarding the charge, which they believe is incorrect. So, lodging a dispute is all about seeking clarity on what went wrong.

On the contrary, chargeback is an entirely different thing, where funds are reversed from the merchant’s account following a customer’s dispute. Once a dispute is lodged, the bank informs the payment provider to initiate a chargeback, which means to forcibly deduct the same amount.

It works as a consumer safety net, which can badly impact the merchant’s income. The higher the chargeback volume, the more the payment loss to the merchant.

When Strip Disputes Occur?

A new dispute opens when the account holder asks their bank to challenge a charge made on their card. This could be due to multiple reasons, such as suspected fraud, dissatisfaction over the service received, or buyers saying they never received the product.

So, whatever the reason is, once the customer raises a concern over unauthorized transactions, the bank takes all necessary steps to lodge the formal dispute.

Next, the payment provider informs you about the dispute via Email and also debits the same amount from your account, including a dispute fee.

For example, let’s say you run a SaaS company where you offer social media management software. The user availed of a free trial but later forgot to cancel the auto-payment, resulting in a charge to their credit card.

So, they contacted the bank instead of contacting your company. Hence, the bank (or card issuer) notifies the payment provider, Stripe, who opens a new dispute and simultaneously withdraws the same amount from your Stripe account.

That’s how it not only hurts your company’s revenue but also damages your hard-earned reputation.

How to Win a Stripe Dispute as a Merchant

If you are currently dealing with ongoing Stripe disputes and find no way to turn the tide in your favor, here are effective ways to follow.

1. Know Disputes Before You Challenge

When you are notified about the dispute, the first thing you do is figure out if you can really challenge the dispute. Ask your team to discover concrete evidence before you take any action. Keep in mind, you can only combat the dispute if you have proper evidence. So, be selective when it comes to dealing with multiple disputes. Filter out the ones for which you can provide evidence and take the matter in your favour.

2. Take Action Before the Deadline

Since the matter isn’t in your hands, timing plays a crucial role. Therefore, make sure you respond to the dispute notification within the given timeframe. Stripe will give you a time of alteast 12 days to gather your evidence and respond with the written statement. In case you fail to manage disputes, your customer will have a pretty good chance of winning a dispute, resulting in your financial loss. Hence, take the necessary steps before the deadline.

3. Assemble Real Evidence

Following the initial investigation, you would have made up your mind to win the dispute no matter what. Intensify your efforts in gathering strong evidence that can save you from unwanted financial loss.

For example, you can refute ‘product not received’ claims by attaching a proof of delivery receipt. Or else, you can attach documents from shipping carriers to nullify the wrong claim. Thus, invest more time in gathering evidence in the form of receipts or screenshots.

4. Elaborate on the Reason Clearly

Capturing the solid evidence, you would know what led you to Stripe disputes. So, mention the reason in a professional manner when preparing a response. It should portray a clear picture of the customer’s purchase and relevant transactions that occurred on a specific date. Plus, don’t forget to attach the same evidence you found earlier in a bid to put yourself in the winning position.

5. Review Carefully Before You Submit

Lastly, buy some time to meticulously read your prepared document in response to a dispute opened by the bank. You can go to the Stripe dashboard and submit your response, including appropriate evidence, in a proper format.

Your response will later be assessed by the bank official to check whether you really met your obligations. The decision to come from the bank will take at least one month or more. In case it rules in your favor, the funds will be deposited into your account.

How to Avoid Stripe Disputes as a Merchant

In case you are a new player in the market who wants to distance yourself from Stripe disputes. Here are what precautionary measures you can follow.

1. Underscore Policies and Agreements

Clearly mention what are your company’s policy before you dispatch the product to the delivery location. In case you are running a SaaS company, inform clients how you will deduct the money once the free trial of the software expires. If you are forcing clients to turn on auto-payments, then you must also describe that they need to turn them off by themselves, or charges will be added to their cards.

2. Maintain Professionalism

In case you never want to deal with unwanted disputes, maintaining professionalism is key to keeping them at bay. Make sure you bridge the communication gaps and keep the customer posted about the upcoming charges that they need to incur. Deal with customer interactions professionally and clear their doubts before they even start using your services. This way, there’s little to no possibility of engaging in the Stripe fraud dispute.

3. Follow Stripe’s Dispute Suggestions

If you never wish to be a part of long-term disputes, keep checking Stripe’s official website to learn about the main cause behind disputes. Taking inspiration from Stripe’s dispute suggestions, you can try to provide more relevant details to users when they first come into contact with your product or service. This will significantly reduce the chances of disputes in the future.

4. Keep Digital Records Handy

Before you start serving your customers, remember to collect a service acknowledgment letter from them. You can either take their signature on a paper document or ask them to sign it digitally while acknowledging your service terms. Later, you can convert paper documents to electronic documents and centralize them in online software or tools to prevent misplacement. By doing so, you have proof to refute disputes before they start escalating.

Final Thoughts on Stripe Disputes

In today’s world, where customer demands are changing more than your business sales numbers, payment disputes are nothing but a frustrating reality for retailers.

Be it Stripe, Razorpay, or any other payment gateway, fighting disputes nowadays feels like a never-ending debate. One small dispute will not only demand more time but also damage your business reputation. But, it might not be a problem as long as you know how to turn the tide using the aforesaid tips.

As a retailer, what you need is a reliable invoicing and payment solution, Moon Invoice. An advanced software can help you dispatch invoices by attaching customer-preferred payment methods that prevent disputes.

Want to explore more about Moon Invoice? Ask us for a free demo.

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