How does chargeback rate work? Starting to get worried about this

Shopify Discussion
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I recently started a store with Shopify 2 months ago. It is a subscription business and we have had a total of 725 orders with sales of $30,058.93. Recently we have been getting a lot of chargebacks. With a total of 8 chargebacks, 6 of them are for “Never Received” even though the tracking tracking shows delivered. 3 customers disputed (2) transactions each with us, but they do not dispute the original order which makes it seem like they are trying to scam me. We have only won 1 of the chargebacks so far because the others still need to be reviewed by their banks.

I am worried because after reading online it says that if our chargeback ratio is above 1% we will be placed under high-risk merchant restrictions. I am trying to understand how the rate is actually calculated. The total valued amount of chargebacks is about $422 vs $30,058.93 in revenue which is over 1%. 8 chargebacks for 725 orders is over 1% too.

How do I deal with this? We have a generous return policy and if people want to cancel then they can cancel. The issue is that they do not reach out to us and immediately dispute it with their bank without returning the products.

Any advise would help. Thanks.

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Hi @pbowner123 , thanks for reaching out to the Shopify Community.

The chargeback rate is calculated as the percentage of orders placed through Shopify Payments that have resulted in a chargeback. This rate can be found in the Analytics > Reports section of your admin. If you are using a different gateway you will need to find their chargeback documentation to see how it’s calculated.

The best way to handle charebacks is to keep all relevant information for all your orders. If you speak to a customer, do so over email or any other forms of writing so you can keep that information. Always opt for shipping with tracking so you can keep track of orders delivery statuses.

You can also check out our fraud prevention tools here, and I would also look over this fraud prevention help doc if you have not yet. There are also some 3rd party companies that help merchants with preventing charge backs, however I have not used them or have any experience to let you know how well they work, but it could be worth looking into if these chargebacks continue.