Handling Stripe disputes can be daunting, especially if you're not familiar with the process. However, understanding how Stripe's dispute system works is crucial for any creator using their services.
This blog post aims to demystify Stripe's disputes, providing practical tips and best practices to navigate and resolve disputes efficiently.
A Stripe dispute, also known as a chargeback, occurs when a cardholder questions a payment made with their card. The cardholder's bank initiates a formal dispute on the card network, which reverses the payment and pulls the money, along with any applicable dispute fees, from your Stripe account. Stripe then notifies you of the dispute through their dashboard, email, webhooks, and API.
Understanding the lifecycle of a dispute can help you manage and respond to them more effectively:
Inquiry Phase: Before a formal dispute, some card networks may initiate an inquiry, requesting more information about a transaction. Responding promptly can prevent escalation to a formal dispute.
Dispute Initiation: Once a dispute is initiated, Stripe debits your account for the disputed amount plus a dispute fee. You cannot issue a refund outside the dispute process during this period.
Response Period: You have a limited time (usually 7-21 days) to respond to the dispute with evidence. The card issuer then reviews the evidence and decides the outcome, a process that can take 60-75 days.
Resolution: The card issuer either overturns the dispute in your favor or upholds it. If overturned, the funds are returned to your Stripe account; if upheld, the funds remain with the cardholder.
Effectively responding to disputes involves providing clear, concise, and relevant evidence. Here are some best practices to follow:
Be Concise: Card issuers review thousands of dispute responses daily. A clear and concise explanation is more effective than a lengthy one. Focus on why the claim is unreasonable and how your evidence disproves it.
Relevant Evidence: Only include evidence directly related to the dispute. For example, if the dispute is about a product not being received, provide shipping and delivery proof, not your entire return policy.
Proof of Authorization: Include evidence showing the cardholder authorized the transaction, such as AVS matches, CVC confirmations, signed receipts, and IP address matches.
Documentation: Keep your evidence well-organized and within file size limits. Use tools to compress files if necessary and ensure documents are legible.
Stripe provides tools to measure and monitor your dispute activity:
Dispute Activity vs. Dispute Rate: Dispute activity represents the percentage of disputes on successful payments by dispute date, while dispute rate represents the percentage by charge date. Monitoring both can help identify patterns and potential fraud.
Excessive Disputes: High dispute activity can lead to fines and affect your ability to process payments with Stripe. Proactively managing disputes and implementing fraud prevention measures can help keep your dispute rate low.
To further help reduce chargebacks, consider implementing these strategies:
| Threshold Type | Threshold Percentage |
|---|---|
| Standard Threshold | Below 0.75% |
| High-Risk Threshold | Anything at or above 0.75% |
| Monitoring Program | Significant increase or sudden spike |
Understanding and effectively managing Stripe disputes is essential for maintaining a healthy payment processing environment. High dispute rates not only impact your finances but can also affect your reputation with payment processors. By following best practices and using Stripe's tools, you can minimize the impact of disputes on your business.
Navigating Stripe disputes doesn't have to be overwhelming. By understanding the dispute process, following best practices for responding, and proactively managing your dispute activity, you can handle disputes more effectively and keep your business running smoothly.