Payments · Guide7 min readUpdated November 2, 2026

Chargebacks for Merchants: How They Work, What They Cost, When They Become a Problem

How chargebacks work for merchants: what happens to your money, what each one costs, when to fight, and the 2026 Visa and Mastercard ratio limits.

Nick Bonnassies, CMO at Tagada · checked against 13 sources

Article summary

TL;DR

When a customer disputes a card payment, the processor takes the amount and a fee from your balance right away. You have 7 to 21 days to answer, and the issuer decides weeks later. Each dispute also counts toward your monthly ratio, won or lost. In 2026, Visa and Mastercard both flag merchants from 1.5%.

Customers can generally dispute for up to 120 days, and you answer within 7 to 21 days, depending on the network.
Stripe US charges $15 when a dispute arrives, not returned, and $15 more if you respond, returned if you win.
Visa's merchant "Excessive" level is 1.5% and 1,500 disputes a month in the US since April 1, 2026; it was 2.2% before.
Mastercard's Excessive Chargeback Merchant program starts at 100 chargebacks and 1.5%.
A won dispute still counts in your ratio; one resolved through RDR or Ethoca before it becomes a chargeback doesn't.

Want to go further? Ask

On this page

This guide follows a chargeback from your side of the counter: your money, your fees, your ratio. For the definition and the cardholder's side, see what a chargeback is.

What happens when a customer files a chargeback

The cardholder's bank starts it, not you. From then on, the amount is held and the clock runs on your side.

Fig. 1One chargeback, from the sale to the decision

SaleDay 0
Dispute filedUp to 120 days later
You respondWithin 7 to 21 days
Issuer decides60 to 75 days later

the money is gone from day one

Stripe timings, from Stripe Docs, read October 14, 2026. Your processor shows the exact deadline.

The issuer opens the dispute and sends it to your acquirer with a reason code1.
Your processor debits the amount and its fee from your balance and notifies you1 4.
You accept it or respond with evidence before the deadline2.
The issuer decides. If you win, the amount comes back. If the cardholder's bank still disagrees, the case can go to pre-arbitration.

Stage by stage, with the deadlines per network: how long a chargeback takes.

What a chargeback costs you

More than the sale. You lose the amount while the dispute runs, and often for good, plus a fee, plus the goods already shipped.

Fig. 2Dispute fee per card chargeback, US

PayPal (card chargeback)20$
Stripe15$
Shopify Payments15$
Braintree15$

Source: Processor fee pages, US, read October 14, 2026

before you even decide to answer

Stripe Support, Shopify Help Center, PayPal and Braintree fee pages, read October 14, 2026.

Cost	What happens	Comes back if you win?
The disputed amount	Taken from your balance when the dispute opens1	Yes
Dispute fee	$15 on Stripe US, $15 on Shopify Payments, $15 on Braintree, $20 on PayPal3 4 5 6	Stripe: no. Shopify: yes3 4
Response fee	$15 more on Stripe US if you respond4	YesOn Stripe4
The goods	Already shipped	No
Network fees and fines	Billed to your acquirer when disputes pile up, often passed on9	No

Fee by fee, processor by processor: chargeback fees.

Accept or fight

Fight only the ones you can win. A response costs time, and on Stripe a second fee4. The reason code tells you what the cardholder claims and what evidence answers it7.

Fig. 3Visa's four dispute categories

10 · Fraud
The cardholder says they didn't make the purchase. For 10.4, Compelling Evidence 3.0 lets you answer with earlier undisputed orders from the same customer.
11 · Authorization
The payment went through without a valid authorization. Hard to win if the authorization really failed.
12 · Processing errors
Duplicate charge, wrong amount or wrong currency. Often your mistake: refund and fix the process.
13 · Consumer disputes
Not received, not as described, cancelled subscription. Winnable with tracking, terms shown at checkout and your cancellation records.

the category tells you if a fight is worth it

Source: Visa Core Rules and Visa Product and Service Rules, April 18, 2026.

Once a chargeback is open, you can't refund outside the dispute: you accept it or you respond1. Before that, a full refund closes the matter. More on the difference: chargeback vs refund. Codes one by one: chargeback reason codes.

Watch out

A won dispute still counts in your ratio. The networks measure how many disputes you get, not how many you win9.

When your chargeback ratio becomes a problem

Your ratio is disputes divided by transactions, each month. Visa and Mastercard both start monitoring merchants at 1.5% in 2026, but they count differently8 10.

Program	Counts	Merchant threshold, 2026
Visa VAMP	Fraud reports plus disputes, over card-absent sales of the same month8	1.5% and 1,500 cases (US, Canada, Europe, Asia Pacific, Latin America)8
Mastercard ECM	Chargebacks this month, over last month's transactions10	100 to 299 chargebacks and 1.5% to 2.99%9
Mastercard HECM	Same	300 chargebacks or more and 3%9

Fig. 4Where 1.2% sits

1.2%Monthly dispute ratio

under the line, not out of sight

Illustrative example.

Disputes you settle through Verifi RDR or Ethoca, before they become chargebacks, don't count in your dispute rate at Stripe11, and Visa leaves pre-dispute resolutions out of its VAMP ratio8. The formulas, with a worked example: chargeback rate.

Is there an average chargeback rate?

Not an official one. Neither Visa nor Mastercard publishes an average ecommerce chargeback rate. The averages you see online come from dispute-management vendors, with their own client base and method.

Aim for the thresholds instead. They decide what your acquirer does, and your processor often acts earlier: Stripe sizes reserves on your dispute rate, among other signals13.

What happens if you go over

It escalates month by month. Each step is harder to reverse than the one before.

Your acquirer warns you and asks for a plan to bring the ratio down9.
Fines start in month two on Mastercard's program: $1,000 a month at first, up to $100,000 a month from month 199.
Your processor protects itself: a reserve, slower payouts or a review. See rolling reserves.
The account can be closed. See merchant account closed.
A closure for excessive chargebacks can mean a MATCH listing (code 4: Mastercard chargebacks above 1% of sales and $5,000 or more), kept 5 years12. See the MATCH list.

Mastercard fines and exit rule from Stripe Docs, read October 14, 2026. Visa sets its own exit rules in its program guide.

You leave Mastercard's program after 3 consecutive months below the threshold9. Every program, its fines and its exit rules: chargeback monitoring programs.

How to bring chargebacks down

Start from your own reason codes, then fix the cause they point to.

Many 13.x "not recognized" or "cancelled"Customers forget the purchase or the renewalClear descriptor, reminders before renewals, easy online cancellation
Many 10.x fraud claimsStolen cards, or friendly fraud3DS on risky payments, Compelling Evidence 3.0 for repeat customers
Disputes you would refund anywayThey reach the network before you hear of themAlerts: RDR and Ethoca, so the dispute never counts

Eighteen ways, ordered by reason code: how to prevent chargebacks. Alerts in detail: chargeback alerts.

By industry

Industry	What changes	Guide
Supplements	Forgotten subscriptions, unclear trials and "it didn't work" claims drive most disputes	Chargebacks for supplement brands
Skincare	Forgotten refills, results that didn't match the ad and skin reactions handled badly	Chargebacks for skincare brands
Online pharmacy	Visa makes the acquirer check pharmacy disputes daily; card holds read as charges, orders refused after review and refills billed before shipping drive them	Chargebacks for online pharmacies
Telehealth	Charges patients didn't expect: before the clinician's review, after a cancellation, or under a descriptor they don't recognize	Chargebacks for telehealth companies
Fitness	Heavy equipment that arrives late, damaged or not as pictured, and sports nutrition subscriptions customers forget	Chargebacks for fitness brands
Info products	The income promise, long programs the buyer stopped using, and forgotten memberships or payment plans; logged access is the evidence	Chargebacks for info product businesses

How Tagada helps

Fewer disputes, and more than one processor

Native 3DS2, device intelligence and a rules engine to stop fraud before it turns into a dispute.
Subscriptions with trials, billing cycles, retries and automatic recovery.
Routing across TagadaPay and processors such as Stripe, NMI and Airwallex with one logic, so a review on one account doesn't stop every sale.
TagadaPay underwrites every file and refuses businesses that try to get around chargeback rules.
Approval routing: each payment goes to the processor most likely to approve it, with a retry on decline and no engineering required. TagadaPay reports a +18% approval uplift.
From 2.9% + $0.29, no setup fees, no monthly minimums. High-risk verticals and edge cases are priced case by case.
24/7 human support on Slack Connect: "The person who reviews your application has a name, and so does the one who picks up when something breaks."

Tagada follows Visa and Mastercard rules and the laws that apply to payments.

Apply today · Go live in under 24 hours

Apply for processing

Fewer disputes, and more than one processor

Updated on November 2, 2026

Nick Bonnassies

CMO at Tagada

CMO at Tagada. Before Tagada, Nick built direct-to-consumer brands that generated over $115M in sales, raised over $25M in crowdfunding and sold two of them. He also works as a fractional CMO on marketing operations and AI systems.

Frequently asked questions

How does a chargeback work for a merchant?

The cardholder's bank opens a dispute and your processor takes the amount and a fee from your balance. You accept or answer with evidence, usually within 7 to 21 days. The issuer then decides, often 60 to 75 days later. If you win, the amount comes back; the fee may not.

Who pays for a chargeback?

You do, in most cases. The amount is taken from your balance as soon as the dispute opens, and the processor adds its dispute fee: $15 on Stripe US, $20 for a card chargeback on PayPal. If you win, you get the amount back. Fines from the networks come on top when disputes pile up.

Do I get my money back if I win a chargeback?

You get the disputed amount back. The fee depends on the processor: Stripe US keeps its first $15 and returns the $15 response fee when you win, while Shopify Payments returns its $15 fee. The won dispute still counts in your monthly ratio.

What is an acceptable chargeback ratio?

Stay well under 1.5%. In 2026, Visa flags US merchants at 1.5% and 1,500 disputes a month, and Mastercard at 100 chargebacks and 1.5%. Your processor may react earlier, with a reserve or a review, so keep a margin below the line.

What happens if a merchant has too many chargebacks?

The acquirer puts you in a remediation plan, and fines can start in month two. The processor can add a reserve, slow payouts or close the account. A closure for excessive chargebacks can lead to a MATCH listing that stays 5 years.

Should I fight every chargeback?

No. Fight when your evidence answers the reason code: tracking for "not received", checkout terms and cancellation records for subscriptions, earlier orders for some fraud claims. Accept the rest, and fix the cause. Fighting costs a second fee at some processors, and winning doesn't lower your ratio.

Sources

Checked November 2, 2026

TagadaPay

Keep disputes low and payments moving

Tell us what you sell and how you sell it. Each application is underwritten, and approval is not guaranteed.

Apply for processing See pricing

01Tell us what you sell and how
02Underwriting reviews your business
03Process through TagadaPay alongside your other processors