Fighting vs. Preventing Chargebacks: Which Strategy Best Protects Your Revenue?

Seasonal sales bring a welcome surge in revenue, but they also deliver an increased need to handle chargebacks. As transactions peak during holidays and major promotions the months that follow are often marked by refund requests, disputes, and fraudulent claims.

For many businesses, this period delivers a rise in chargeback volumes as customers dispute charges tied to these holiday purchases. The challenge lies in deciding how you can best handle seasonal chargebacks — is it best to fight them or worth the effort trying to prevent them from happening in the first place?

Fighting chargebacks plays a crucial role in recovering revenue, and preventing them is effective at reducing long-term costs and preserving operational efficiency. Let’s break down both strategies to see what offers your best defense against spikes in chargebacks after holidays and promotions.

Seasonal Sales and the Chargeback Surge

The increase in transaction volume during holidays and promotional periods naturally leads to more disputes in the following months. As your customers review their statements, seek refunds, or question unfamiliar transactions, chargebacks can spike in the post-holiday window.

Fighting vs. Preventing Chargebacks — What’s the Difference?

Chargeback management falls into two categories — fighting disputes after they occur or preventing them from happening altogether. While both strategies are essential, their roles and impact differ significantly.

Fighting Chargebacks - This reactive process involves responding to disputes after the consumer has filed a claim. Merchants gather evidence to prove the validity of the transaction and submit it to the issuing bank for review.

Preventing Chargebacks - This proactive approach focuses on stopping disputes at the source by addressing fraud, communication gaps, and operational issues before they escalate. Prevention relies on fraud detection, chargeback alerts, and customer experience strategies to minimize risk.

Why Fighting Chargebacks Matters

While prevention may seem an obvious preferred route, fighting chargebacks remains an important tool for businesses seeking to reclaim lost revenue and defend against fraudulent claims.

Fighting chargebacks is especially valuable when you’re dealing with:

• High-Value Transactions: For large purchases, contesting disputes protects against significant revenue loss.
• Friendly Fraud: When customers dispute legitimate transactions, merchants need the ability to recover funds by presenting compelling evidence.
• Building Processor Trust: A proven track record of successfully fighting chargebacks signals to payment providers that your business actively manages risk.

However, relying solely on fighting chargebacks is inefficient. Without a prevention strategy, disputes will likely continue to rise, placing undue strain on teams and increasing costs.

The Hidden Costs of Fighting Chargebacks

Even with successful disputes, the process is resource-heavy and carries hidden expenses. Fighting chargebacks can protect revenue, but it doesn’t eliminate the operational and financial burdens that come with each dispute.

Additional Costs of Fighting Chargebacks:

• Chargeback Fees - $15 to $50 or more per dispute, whether you win or lose.
• Brand Impact - Repeated disputes damage customer relationships and reduce long-term retention.
• Labor Costs - Teams may spend hours collecting documentation, and even automated evidence gathering diverts resources from other business functions.
• Increased Monitoring - High chargeback ratios can trigger monitoring programs, such as Mastercard’s Excessive Chargeback Program and Visa’s VAMP.

Why Prevention Delivers Greater Value

Preventing chargebacks is the most effective way to reduce disputes and protect revenue at the source. By intercepting risky transactions, resolving customer issues early, and blocking fraud, businesses avoid the costs and complications of post-dispute resolutions.

The benefits of prevention include:

• Fewer Chargebacks - Prevention tools reduce a sizable amount of disputes.
• Enhanced Customer Experience - Resolving issues early builds trust and loyalty.
• Lower Operational Costs - Automation reduces manual intervention, allowing teams to focus on growth.
• Protection for Merchant Accounts - Having fewer disputes means staying below the thresholds that trigger penalties.

Chargeback Prevention Best Practices

1. Utilize Chargeback Alerts (Ethoca and Verifi): Get notified as soon as a dispute is initiated, allowing you to intervene and resolve issues before they turn into chargebacks.
2. Adopt AI Fraud Detection: Machine learning tools analyze transaction patterns in real-time, blocking fraudulent purchases before disputes occur.
3. Improve Billing Transparency: Use clear, recognizable descriptors to prevent confusion and reduce friendly fraud.
4. Simplify Returns and Refunds: Offer seamless return processes, ensuring customers choose a refund over a chargeback.
5. Strengthen Customer Communication: Proactive updates on shipping delays, billing changes, and subscription charges can reduce disputes tied to miscommunication.

Why an End-to-End Solution Is Essential

Managing chargebacks effectively requires a solution that prevents disputes while efficiently handling those that inevitably happen. An end-to-end approach — like ours — provides:

• Real-time fraud prevention to stop bad transactions.
• Chargeback alerts to intercept disputes early.
• Automated workflows that manage post-chargeback resolutions.

This comprehensive approach ensures your business can protect its revenue, minimize operational drain or strain, and strengthen customer relationships.