You checked your merchant statement and spotted a fee that doesn't make sense. The transaction was already refunded, or maybe you never even saw a dispute come through. So why did you get hit with a chargeback fee?
Let's break it down.
What a Chargeback Fee Actually Covers
A chargeback fee is a penalty your payment processor charges when a customer disputes a transaction through their bank. It's separate from the refunded amount and can range from $15 to $100 per dispute, depending on your processor and risk category.
This fee isn't just for handling the refund. It's meant to cover the backend cost of investigating, transmitting evidence, updating systems, and sometimes even absorbing the chargeback loss. For high-risk merchants or those with poor dispute ratios, it's often higher.
You can get hit with a chargeback fee even if:
- You already issued a refund
- The customer never contacted you
- You didn't lose the case (yes, some processors still charge it)
Why the Fee Might Feel Random
Even if it seems to come out of nowhere, there's always a trigger. These are the most common:
1. You're in a High-Risk MCC
Certain Merchant Category Codes (MCCs) are more prone to disputes, such as online supplements, coaching, or travel bookings. Due to elevated risk, processors automatically apply higher chargeback fees for these industries.
Even if you've had a clean track record, being in one of these MCCs means you're operating under tighter scrutiny.
2. Your Dispute Ratio Crossed a Threshold
If your monthly chargeback ratio goes above 0.9% (or 1%, depending on the network), many processors will auto-apply higher fees. Some will even retroactively apply these higher fees across recent disputes, especially if you've hit a card brand's risk monitoring program.
Mastercard's Excessive Chargeback Merchant (ECM) threshold is 1.5%. Visa's standard is 0.9%. Hit those numbers, and the fees can stack fast.
3. Processor Default Policies
Some payment processors charge a fee for every incoming dispute, whether you win or lose. Others may waive it if you successfully defend the chargeback. These rules are often buried in the service agreement.
For example:
- Stripe charges a $15 fee per dispute.
- PayPal deducts up to $20 from your account for each chargeback unless covered by Seller Protection.
- Some ISOs and acquiring banks charge more, especially in regulated verticals.
4. Refund Was Too Late
If you refunded a customer after they submitted a dispute, the bank usually processes both. That means you refunded the full transaction but still got hit with the chargeback and the fee. The bank might resolve the dispute in your favor eventually, but the fee still lands on your statement.
5. Pre-Arbitration or Representment Escalation
If you fought back and lost the first round, the issuing bank might escalate the case to pre-arbitration. That can trigger an additional fee, especially if your processor considers that a second dispute.
Most merchants aren't told when this happens unless they track each dispute closely.
What to Do If You Got Hit With a Surprise Fee
Start by identifying:
- The original transaction and dispute ID
- The processor's reason code or notes
- Whether a refund was already issued
- If the fee matches your contract terms
Then check:
- Your dispute win/loss ratio
- Recent MCC classification changes
- Processor thresholds for increased fees
Ask your processor if the fee was:
- Triggered by exceeding a network threshold
- Due to an escalated case (like pre-arb)
- Automatically applied for all chargebacks
If you're on a high-risk processor or aggregated platform, these fees are often non-negotiable. But if you're seeing unexpected patterns, it may be time to renegotiate or migrate to a more transparent dispute-handling setup.
Final Thoughts
A chargeback fee can feel random, especially when you have already refunded the customer or thought the case was closed. But there's always a reason buried in the payment chain, processor policy, dispute threshold, or your MCC risk rating. Knowing how your platform handles disputes is the first step to controlling these fees.
FAQ: Why Did I Get a Chargeback Fee?
Why did I get a chargeback fee even though I refunded the customer?
If the customer filed a chargeback before or shortly after you issued a refund, the issuing bank may still process the dispute. That means you refunded the payment and still got tagged with the chargeback fee.
Do I have to pay a fee if I win the dispute?
It depends on your processor. Some platforms refund the chargeback fee if you win, while others keep it regardless of the outcome. Always check your agreement.
Can chargeback fees be waived?
Sometimes. If it was a first-time incident or clearly an error, some processors will remove the fee as a courtesy. But in most cases, especially with automated systems, they're non-refundable.
How do I find out what my chargeback fee is?
Check your merchant agreement or pricing schedule. You can also look at past statements to see how much was deducted each time a dispute came in.
What's the highest a chargeback fee can go?
Some high-risk processors charge $100 or more per dispute. The typical range is $15 to $35 for most standard merchants, but it can be much higher in industries like crypto, adult, or international supplements.
Tired of Guessing What Triggers a Chargeback Fee?
Chargeblast helps merchants spot risky transactions early and take action before they turn into disputes. Our platform connects directly to your processor, so you can monitor dispute ratios, MCC risk profiles, and processor fee policies in one dashboard. Don't wait for the next fee to show up on your statement; stay ahead of it.
