August 23, 2013  |     |     |   0 Comment

Chargebacks occur when a customer who had previously purchased a product from a merchant reverses the transfer of funds to the merchant. This is common in e-commerce and drop-shipping websites where a customer may decide to reverse their order. When purchasing such a website, it is normal that there will be some chargebacks.

However, a huge number of chargebacks relative to total sales orders may indicate a high level of customer fraud. In this case, the customer may order the product using stolen credit cards or banking information, receive the product, charge it back, and not pay for it. A more robust and secure credit card or payment system usually eliminates this problem.

On the other hand, high chargeback rates may be due to the poor quality of products or services offered by the merchant. Customers don’t like the product and charge it back. The website buyer can thus decide not to buy the website and its products or he can decide to buy the website and improve the product quality.


Kris Tabetando provides mergers & acquisitions (M&A) advisory and brokerage services to Internet companies. He also partners with investors to acquire & manage Internet businesses.

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