Credit Card Disputes: What Are They and How To Prevent Them?

May 11, 2020
Lucas Ennis (he/him)
4 min read

We all know that the Covid19 pandemic has taken a huge toll on tourism and other industries globally. As a payment and booking platform for travel companies, we’ve seen a high number of cancellations for trips booked in 2020.

Stats from our recent industry survey indicated that nearly 20% of tour operators have received disputes from their clients, and 11% of travelers are thinking about calling their credit card companies. This poses a potential threat to your business as disputes can lead to chargebacks, costing you money and damaging the reputation that you have worked so hard to build.

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So, what exactly are credit card disputes? And how can you prevent them from happening in the first place? Our video below gives you the 101 on the matter, or keep reading for more information.

What Is A Credit Card Dispute?

In a nutshell, a credit card dispute may occur when a cardholder disagrees with the accuracy of a merchant charge that appears on their statement. In this case, your clients are the cardholders, while you are the merchant selling your tours or travel product.

Typically, the charges fall into one of three categories, namely:

  • Fraudulent charges
  • Billing errors
  • Complaint about the quality of goods or services purchased using the card

Due to uncertain circumstances caused by COVID-19, more and more travelers are canceling and asking for refunds. It might be that the trip is no longer going forward due to travel restrictions, or the client no longer wishes to travel for safety reasons. Perhaps you are unable to go ahead with the tour as planned due to external factors beyond your control.

Whatever the case, if you don’t immediately issue those refunds, your clients are more likely to contact their issuing bank and file for a dispute.

Overall, card networks and banks have policies and rules in place to ensure that the credit card payments process is safe, fair, and well-regulated by consumers. They take disputes seriously and protect consumers against fraud, theft, and unauthorized use of their cards.

Travel wallet

How Do Disputes Arise?

If your client is forced to cancel or cancels a trip on their own accord and would like a refund, they are supposed to contact you first to discuss the matter directly.

However, if they are unable to contact you or you cannot come to an agreement on a resolution such as issuing refunds or offering credits for future use, their next step is to reach out to the issuing bank.

This is the bank or financial institution that issued the card to your client, allowing them to initiate purchases using the card.

At this point, the bank will ask if they have contacted you and tried to resolve the issue directly with you.

If the client declares that they haven’t been able to do those things, it will give them a temporary credit, which you, as a merchant, will automatically be liable for.

Then the issuing bank will send a retrieval request for further information from your acquiring bank. This is the merchant bank, which accepts the card transaction deposits on your behalf.

It’s at this point when a credit card dispute becomes a chargeback. All chargebacks arise from disputes, but not every dispute becomes a chargeback.

Resolve disputes

What Are Chargebacks and Why Avoid Them?

If a chargeback is initiated against you, the law tends to lean in favor of the cardholder. Bear in mind that you will need a clear set of terms and conditions that the traveler has signed to ensure that you have a case to begin with.

Because the merchant is automatically liable for a chargeback, it’s your responsibility to provide evidence that a transaction was legitimate if you want to keep your money and fight the claim. Ignore the chargeback and it will automatically be awarded in favor of your client.

If you do decide to fight the chargeback after the bank has notified you of the claim, it will proceed to one or more of the additional phases of the process.

Even if you are awarded the claim in the earlier phase, it can be repealed by any of the affected parties. The bank then has one final chance to work things out, which if it doesn’t, the card network will go on to make the final call.

During this last phase of the process, the appealing party has to pay heavy fines to the card network, often amounting to hundreds of dollars.

Aside from the expensive fines and damage to your reputation, there is one other thing to consider: your chargeback ratio.

This is a threshold, usually set at around a 1% ratio of chargebacks to total revenue, that you cannot exceed. Anything over that and you may be deemed a risky customer for payment processors and your account closed.

Going forward, to continue processing credit card payments you would have to consider an account with an expensive, high-risk payment processor.

Prevent Chargebacks

How To Prevent Credit Card Disputes and Chargebacks

As you now know, preventing credit card disputes from turning into chargebacks is crucial. When customers approach you before speaking to the bank, you have an opportunity to resolve the dispute and ensure that they're happy.

Keep in mind that any breakdown in communication can have implications for your client relationships and result in bad PR for your travel business. Not to mention the expensive fines and payment processor companies dropping your business.

Our blog post details the tips and best practices to help you proactively prevent disputes and chargebacks caused by cancellations or the inability to deliver your services.

However, as a quick overview, we recommend that you:

  • Make it easy for clients to talk to you before the bank
  • Provide outstanding customer support at all times
  • Be clear and empathetic when communicating with clients
  • If clients ask for a refund, issue them quickly with no strings attached
  • Update them on any delays you are experiencing
  • Respond to queries as soon as possible – leaving things unanswered can result in unhappy customers
  • Be understanding and flexible given the situation

Resolve Travel Chargebacks


The best approach to credit card disputes is to prevent them from happening. Actively communicate with your clients, and be aware of the repercussions of letting disputes turn into chargebacks. It could affect your ability to continue operating in the future as client relationships break down and payment processors decline your business.