Friendly fraud makes for a large part of merchant credit card fraud and deserves extra attention. This type of fraud occurs when a customer disputes a legitimate charge for a product or service through their bank. The amount is then conditionally refunded to the customer while the issuer investigates.

There are some times in which the customer’s claim is valid: The item wasn’t delivered, the item was returned but no refund was processed, or their credit card was compromised. But unfortunately, this is not always the case. Customers can always make a claim with their bank even if they did receive the product and have no intention of returning it. This is when the transaction becomes friendly fraud (aka ‘chargeback’) and the customer is looking to get repaid for a product or service that they actually received.

In order to help prevent this type of merchant account fraud, business owners should talk to their payment processor as well as:

• Ensure you have shipping and tracking methods in place for every product that goes out. This way you have a better idea of when the order was received by a customer and in some cases even have photo proof that it made it to their doorstep.


• Clearly display your refund and return policy on your website. It should state the timeframe in which an item can be returned and when the refund should appear as well as have contact information available to the customer.


• Handle returns in the same way as purchases. Track the shipments so that the customer has no chance of claiming a return was made when, in fact, it wasn’t.


• Reach out to the customers to get their feedback on the delivery of the product or service. This may include a confirmation that they received the product or service, a confirmation that their card was charged correctly, and a way for you to communicate with the customers if anything pops up in the future.