Does a Merchant Account With No Chargebacks Exist?

January 3, 2023

Whatever happened to good old refunds? For buyers today, asking a merchant to give back their money isn’t an option, especially with chargebacks right within reach. Most importantly, the chargeback system was implemented to protect buyers from unscrupulous merchants. But time would soon prove that there are just as many seedy consumers as there are vendors.

Now, because of the negative impact that chargebacks can have on a merchant account, you might wonder whether a no-chargeback merchant account exists. The short answer is no; they don’t. But here’s a more detailed explanation of why you won’t find one and what you can do to avoid chargebacks.

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What are Chargebacks?

First of all, what exactly is a chargeback? This payment protection feature was first introduced in the ’70s to encourage people to apply for credit and debit cards. Back then, most consumers were afraid of brand-new plastic card technology. That’s because if a card were to be lost or stolen, it would be possible for strangers to use the payment option at the expense of the name on the card.

So to combat that, banks introduced the chargeback feature. Of course, there were always ‘refunds’ which essentially entailed a buyer heading up to a merchant to ask to get their money back. But the chargeback was different in that the buyer could bypass the merchant and go straight to their merchant account provider.

With a chargeback, consumers skip the middleman and request the bank to take money out of the merchant’s account to send back to the buyer. This also means that merchants were often left clueless about the transaction until they finally saw it on their statement. Buyers aren’t even required to return the product they’re trying to get a chargeback for.

Needless to say, the system worked, and the late ’70s saw a boom in credit card applications and usage. This safety net made consumers feel more confident that their money would be safe no matter what. Unfortunately, chargebacks weren’t quite as positively received on the merchant’s end.

Why Should Merchants Avoid Chargebacks?

A chargeback is like a refund, so what’s the big deal? If a buyer came into your shop asking to get their money back, wouldn’t you hand it over just the same, especially if their complaint was valid? Well, that is true. But chargebacks deal much more damage than just granting a refund out of the register.

First, chargebacks come with steep penalties that can gradually increase over time. You could get charged between $20 to $100 per chargeback, but banks will increase the fee with each new chargeback you’re slapped with. For instance, you first could cost you $20, then the next one $30, and so on.


Another reason why chargebacks can damage your business is that they increase your risk rating. Banks don’t want to work with high-risk merchants and often impose steeper charges on merchant services than those offered to low-risk merchants.

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And then, of course, there’s the risk of account freezing and closure. Banks don’t like it when they have to execute too many chargebacks for a merchant. So they’ll freeze or shut down your account if you get too many. This can leave your funds inaccessible and may even cause losses for your business if it reaches the point of shutdown.

Aside from all of that, there’s the MATCH list. An abbreviation meaning Member Alert to Control High-Risk Merchants, the MATCH list is quite literally a list of all the blacklisted high-risk merchants who have ever applied for and secured a merchant account. The list is maintained by Mastercard and lets banks know which merchants to avoid working with due to their history of frequent chargebacks.

Being placed on the MATCH list means you could struggle to find a banking partner willing to work with your business in the future. On the upside, MATCH list inclusion only lasts for five years, and being placed on the list doesn’t automatically get your existing merchant account/s shut down.

Why Don’t Banks Like Chargebacks?

It’s pretty simple. Taking money from a buyer’s account and siphoning it into a merchant’s account costs money, thus the need for a processing fee. Depending on your contract with your provider, this can cost anywhere from 0.5% to 5.0% of the total transaction cost.

In the same light, reversing the transaction also costs money. But because this isn’t precisely the primary service that merchant account providers set out to do, the charge isn’t something they’re as comfortable with. So they end up charging merchants exorbitant fees that can cost several times the actual transaction price.


Chargebacks as Friendly Fraud

These days, chargebacks are labeled as ‘friendly fraud’ in some cases because consumers often abuse them to get money back for valid and legitimate purchases. In effect, consumers can hide behind a complaint, parade it as a reason to file for a chargeback, get their payment reversed, and still keep the product they paid for.

According to surveys, more than half of those who request a chargeback do so because the purchase was ‘unauthorized’ and therefore, fraudulent. But another study found that almost 80% of those who filed for a chargeback did so simply because they found the refund process to be a little too time-consuming for their taste.

There are loads of reasons buyers might request a chargeback, many of which are invalid. These include:

  • Buyer’s remorse
  • Lengthy return and refund process
  • It took too long to deliver
  • A family member purchased without the consent of the cardholder
  • The buyer forgot about the transaction
  • Not wanting the product after all
  • Incorrectly reading product descriptions and thus getting a false idea of what the product would be like

Because most people know these reasons won’t win them their chargeback, they resort to other, valid reasons like fraud. And because the customer is always right, banks will unfairly side with consumers with these sorts of complaints. That is just how the chargeback system is set up.

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How to Prevent Chargebacks

Now, the big question on every merchant’s mind — how exactly can you stop or prevent chargebacks from happening? There are a few things you can try to keep your customers from pushing through with their chargeback requests:

  • Provide all the details – Sometimes, buyers will move on straight to a chargeback simply because they didn’t know a part of the transaction they were making. Maybe they didn’t correctly read the sizes, maybe they thought delivery wouldn’t take more than a day, or maybe they didn’t realize their phone’s screen probably presented the product in a different color.

Providing your buyers with all the information they need in more ways than one can help guarantee that they’re entirely aware of what they’re getting themselves into. Some sellers even require that buyers tick a box indicating they’ve read all the details before they can tender their payment.

  • Streamline the refund process – Getting a refund is often seen as a cumbersome process requiring buyers to send back their product, have it checked by the store, and then wait a few days to get their money back. If you’re a disgruntled, unhappy buyer, those steps might not be worth the trouble, especially if you can bypass straight to getting your money back with a chargeback.

So it helps if businesses can streamline their refund and returns process to make it more enticing for buyers who want to dispute a purchase. Offering dissatisfied customers things like freebies, free shipping, extra store credit, or anything similar for opting to get a refund instead can dissuade them from a  chargeback.

  • Watch out for frauds – With most chargebacks rooted in fraud, it’s ideal that merchants do what they can to protect against fraud. Most payment processing service providers will offer anti-fraud solutions that help to protect your business against potentially problematic transactions.

See that you protect your business by choosing a merchant service provider that can safeguard your transactions with a hedge of robust fraud detection and prevention features. This can reduce your chargeback ratio and lower your business risk.

The Reality of Chargebacks

Unfortunately, there is no such thing as a merchant service provider or a bank that doesn’t impose chargebacks. But even then, there are things you can do to effectively prevent your business from being the brunt of the chargebacks.

Consider these tips as you fight fraud and keep your reputation guarded. Chargebacks happen to the best of us, but with the proper measures, you can limit the frequency and keep your merchant account up and running without a fuss.

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