If you’ve ever had a customer payment reversed without warning, you’ve experienced a chargeback. Chargebacks are on the rise across the restaurant and retail industries, and for small business owners, with retail e-commerce chargebacks growing by 233 percent between Q1 and Q3 of 2025. Global dispute rates also spiked 78 percent year-over-year in Q3 2024.

For small business owners, even a handful per month can quietly eat into your margins, and with chargebacks projected to cost businesses approximately £25.5 billion in 2025, its essential to understand what chargebacks are and how to avoid them.

With the right processes in place, you can protect your revenue, keep your payment processor happy, and spend less time fighting disputes. Here’s what you need to know.

What Is a Chargeback?

A chargeback happens when a customer disputes a charge with their bank instead of coming to you directly. The bank reverses the transaction, pulls the funds from your account, and often tacks on a fee. What’s worse is that the customer often still has the product or has already eaten the meal, leaving you in the lurch.

How Chargebacks Work

When a customer disputes a charge with their bank, the bank reviews the claim, and if they side with the customer, they reverse the transaction and pull the funds directly from your account. You’re then hit with a chargeback fee from your payment processor, typically ranging from £15 to £75, on top of the lost revenue from the original sale and the cost of the product.

There are three key players in every chargeback: the customer (or cardholder), their issuing bank, and your payment processor. The issuing bank acts as the judge, and unfortunately, the process is heavily weighted in the customer’s favor.

Once a chargeback is filed, you’ll typically have 7 to 30 days to respond with evidence, depending on your payment processor and the card network involved. Miss that window, and the dispute is automatically decided against you. It’s a tight timeline, which is why having good record keeping in place before a dispute ever arises is so important.

Chargebacks typically fall into four categories:

• Outright fraud: A stolen card is used to make a purchase without the cardholder’s knowledge or consent.
• Friendly fraud: A customer disputes a legitimate charge, claiming they never received an item or meal they actually did.
• Service disputes: A wrong order, a poor experience, or a no-show fee the customer refuses to accept.
• Processing errors: A duplicate charge or incorrect amount billed.

How to Protect Your Business fron Excessive Chargebacks

The good news is that most chargebacks are preventable. Use EMV (Europay, Mastercard, VISA) chip readers and contactless terminals for in-person payments, and an address verification system (AVS) for online orders. These simple steps cut off the most common routes for fraudulent transactions.

Clear policies are your next line of defence. Make sure your refund and cancellation terms are visible on your website, receipts, and menus. If a customer knows the rules upfront, they have far less grounds to dispute a charge later. Restaurants should also consider requiring a deposit or card hold for large reservations to protect against no-show disputes.

Good recordkeeping ties it all together. Save transaction data, order confirmations, and customer communications so that if a dispute is filed, you have the evidence to fight it. And you should fight chargebacks whenever they happen. Merchants who contest chargebacks with solid documentation win more often than those who don’t. Don’t assume every chargeback is a foregone conclusion.

Lean on Your EPOS for Fewer Chargebacks

The good news is that your EPOS system can help you prevent fraudulent chargebacks. From flagging suspicious transactions to keeping detailed records of every sale, a modern EPOS system is one of the most effective tools to protect you against fraud.

If you’d like to find out how Everything EPOS can help your restaurant or retail business reduce chargebacks and take more secure payments, get in touch with our EPOS specialists today.