Why Chargebacks Are a Bigger Threat for High-Risk Businesses (And How to Reduce Them)
8 July 2025
Chargebacks are an inevitable part of online commerce—but for high-risk merchants, they can become a serious threat to profitability, merchant account stability, and long-term scalability.
If you're operating in industries such as CBD, nutraceuticals, adult services, gaming, travel, or crypto, you're likely already familiar with the risks. This article explains why chargebacks are especially damaging for high-risk businesses, and most importantly, how to reduce them using proven tactics.
What Are Chargebacks?
A chargeback occurs when a customer disputes a transaction and their bank reverses the payment. While chargebacks are designed to protect consumers from fraud or billing errors, they often result in revenue loss and penalties for the merchant.
For high-risk businesses, chargebacks are not only more frequent—they're also more difficult to fight due to the nature of the products, services, or regions involved.
Why Chargebacks Hit High-Risk Merchants Harder
High-risk businesses are flagged by acquiring banks and card networks due to one or more of the following:
- Elevated fraud rates
- High volume of subscription or recurring billing
- International or cross-border transactions
- Regulated or controversial industries
These factors make banks more cautious, which means:
- Your chargeback threshold is lower (typically 0.9% of total transactions)
- You're more likely to face rolling reserves, higher processing fees, or account termination
- Visa and Mastercard may place you in monitoring programs (e.g., Visa Dispute Monitoring Program - VDMP)
The Rise of Friendly Fraud
Friendly fraud is when a customer disputes a legitimate transaction—either by mistake or intentionally to get a refund while keeping the product or service.
In high-risk sectors, friendly fraud is rampant, and the cost of contesting it can be time-consuming and expensive.
Common friendly fraud examples:
- "I didn’t recognize the charge"
- "I never received the product"
- "The subscription kept charging after cancellation"
- "I didn’t authorize the purchase" (when the buyer did)
The True Cost of Chargebacks
Beyond the lost revenue, chargebacks come with hidden costs:
- Fees per chargeback (typically $15–$100)
- Loss of inventory or services rendered
- Administrative time and labor
- Increased risk of account suspension
- Damage to your business reputation and processing limits
For high-risk merchants, even a few chargebacks can snowball into payment processing restrictions or total shutdown.
How to Reduce Chargebacks: Best Practices for High-Risk Merchants
You can't eliminate chargebacks entirely—but you can dramatically reduce them with a proactive strategy. Here’s how:
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Use Clear Billing Descriptors
Ensure the name that appears on your customer’s bank statement matches your business name or website. Avoid generic or unrelated descriptors.
-
Improve Customer Communication
- Send order confirmation emails with itemized details
- Provide tracking for physical deliveries
- Make customer support easily accessible (live chat, email, phone)
-
Be Transparent with Terms and Conditions
Display refund, cancellation, and return policies clearly at checkout and include them in order confirmations.
-
Implement Fraud Prevention Tools
Use systems like:
- 3D Secure 2.0 (Visa Secure, Mastercard Identity Check)
- AVS (Address Verification System)
- CVV checks
- Device fingerprinting and velocity checks
-
Monitor Your Chargeback Ratio
Track disputes monthly. If you're approaching 0.9%, act immediately by adjusting your sales funnel, support, or fraud detection.
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Offer Refunds Before the Dispute
Sometimes it’s better to refund the customer than risk a chargeback. Empower your support team to resolve complaints early.
Bonus: Chargeback Representment Tips
If you receive a chargeback, you can contest it through representment. To win, you need:
- Proof of delivery or usage
- Customer’s IP address, device ID, or login record
- Screenshots of support interactions
- Confirmation of accepted terms and policies
Act fast—deadlines are strict, and incomplete documentation weakens your case.
Final Thoughts
For high-risk merchants, chargebacks aren’t just annoying—they’re dangerous. Left unchecked, they can lead to account freezes, blacklisting, or total loss of payment processing capabilities.
At Money EU, we specialize in high-risk payment solutions designed to minimize chargebacks and maximize business continuity. We provide:
- Smart fraud prevention tools
- Chargeback monitoring and alerts
- Access to reliable acquiring banks
- Support for CBD, nutraceuticals, adult, gaming, and more
Need help with chargeback prevention?
Contact us today and discover how we can protect your revenue and keep your business growing.
