How to Prevent Chargebacks from Ruining Your Shopify Store Revenue

Chargebacks can hit Shopify merchants hard, costing an average of 0.47% of revenue, plus a $15 fee for each dispute. To keep your business safe, aim to maintain a chargeback rate below 1%. Exceeding this threshold could lead to higher fees or even the loss of your payment processing privileges. Fortunately, Shopify provides built-in tools like Shopify Protect. This feature shifts chargeback liability to Shopify for eligible US orders, provided you meet simple criteria—like fulfilling orders within seven days and adding carrier tracking. By using these tools, you can reduce chargebacks by about 20%, allowing you to ship confidently without the delays of manual reviews.

Understand the Financial Impact

Chargebacks cost merchants at least 0.47% of revenue, with each dispute carrying a $15 fee regardless of outcome. Keeping your chargeback rate below 1% is critical—exceeding this threshold can result in higher fees or account restrictions from payment processors. High chargeback volumes can lead Shopify to discontinue your payment processing entirely.

Implement Shopify's Built-in Protection Tools

Shopify Protect is a free fraud prevention feature included with Shop Pay that shifts chargeback liability to Shopify for eligible US orders. To qualify, you must fulfill orders within seven days and add carrier tracking. Protected orders display a shield badge in your admin, allowing staff to ship immediately without holding for review. Shopify Protect achieves a 99.7% acceptance rate for legitimate orders while producing a 20% reduction in chargebacks filed with fraudulent reason codes.

Shopify's fraud analysis uses machine learning across millions of transactions to defend over $13 billion in gross merchandise value annually. The platform automatically assigns risk levels to incoming orders, allowing you to pause fulfillment and verify suspicious details before processing payment.

Automate Risk Management with Shopify Flow

Use Shopify Flow to build automated "if-then" workflows triggered at checkout:

• Auto-tag risky orders: When fraud analysis indicates high risk, tag orders "Hold-for-review," pause fulfillment, and notify your operations team.
• Instantly capture or cancel: For low-risk orders, capture payment and create shipping labels immediately. For high-risk orders with address verification service (AVS) mismatches, cancel and refund automatically.
• Escalate for identity verification: Trigger customer communication sequences requesting photo ID or proof of billing address before fulfillment.

Deploy Advanced Fraud Detection

Third-party solutions like Chargeflow and SEON offer AI-driven prevention that can recover 4x more chargebacks and prevent up to 90% of incoming disputes. These platforms analyze:

• Digital footprint data: Email, phone, IP address, and associated account connections to verify identities instantly.
• Real-time risk scoring: Machine learning algorithms that identify transaction anomalies and assign risk scores, adapting to emerging fraud tactics over time.
• Automated evidence collection: AI automates dispute submission with proper documentation, with manual chargeback fighting achieving only a 12% success rate.

Operational Best Practices

• Use automated payments: Shopify's checkout and POS systems process payments securely, reducing errors from manual card entry.
• Optimize merchant descriptor: Use a clear, recognizable merchant descriptor on cardholder statements to reduce unrecognized transaction disputes.
• Collect proper authorization: Obtain cardholder authorization and use CVS and CVV verification.
• Be accessible to customers: List contact information clearly on invoices and your website so customers reach you before contacting their bank.
• Set clear policies: A straightforward return policy encourages customers to work with you rather than filing chargebacks.
• Leverage Visa's Order Insight: This card network tool lets issuers pull real-time basket data, preventing many claims from escalating to formal disputes.

The most effective approach combines Shopify's free tools with automation and clear customer communication, eliminating the need for manual dispute resolution while protecting revenue before chargebacks occur.

Protect your Shopify store revenue now—set up Safe App in under a minute to automate chargeback prevention and keep your business thriving.