A chargeback is when a customer goes to their card company instead of to you, and asks for their money back. The card company takes the money back out of your account, and you are charged a fee on top. For a dropshipping shop, where you never see the parcel, they are worth understanding before your first one arrives.
What a chargeback is
gov.uk says that if a customer asks their credit or debit card company to reverse a payment, the money can be taken back from you, and this is called a chargeback. It can happen when an order never arrived, when it wasn't as described, or when someone used a card without the owner's permission. It can happen up to 120 days after the payment, or after the date the order was due to arrive.
gov.uk also says the risk is higher for sales where the card isn't there in person, which includes every online sale.
Credit cards give customers extra protection
Under section 75 of the Consumer Credit Act, when a customer pays by credit card for something costing more than £100 and no more than £30,000, the card company is responsible along with you if something goes wrong. Debit cards don't have that law behind them, but the card companies run their own chargeback scheme, so customers can still ask.
What each payment company charges you
- Stripe charges £20 for each dispute you receive. If you answer it yourself, that is another £20, which you get back only if you win. If you appeal, that is £20 more, which you don't get back even if you win.
- Shopify Payments charges £10 for a chargeback in the UK, and gives it back if you win.
- PayPal charges £14 for a card chargeback, and £12 when a buyer opens a dispute through their PayPal account.
- WooPayments and Wix Payments each charge £15.
That is on top of the sale itself, which comes back out of your account, and you have usually already paid your supplier for the order.
You don't get long to answer
Stripe and Shopify both say you usually have between 7 and 21 days to send your evidence, depending on the card company. Stripe says if you miss the deadline you lose automatically, and that you only get one chance to send your evidence.
The records that help you win
Stripe's own advice on answering disputes points to the same few things. Keep them for every order from day one:
- Tracking that shows delivery, with the dates it was sent and delivered. For an order the customer says never arrived, Stripe asks for tracking, the courier's confirmation or a signed receipt.
- Every message between you and the customer.
- Your refund and returns policy as it was when they bought, and proof they could see it.
- The order itself: what they bought, the description and the delivery address.
Stripe says the card companies won't look at links, including links to tracking pages, so save the details themselves, for example as a screenshot.
The best chargeback is the one that never happens
Most chargebacks start with a customer who couldn't get an answer. Put a clear delivery time on your website, reply to messages quickly, and refund promptly when you should. A customer who gets their money back from you has no reason to go to their bank. Our guide to returns and refunds explains what they are owed.
