What’s the true cost of a chargeback for businesses?

• Each chargeback costs merchants an average of $128 in third-party fees and internal costs. 
• Financial institutions (FIs) in the U.S. pay around $9 to $10 on average for each dispute they process.
• The global value of chargebacks is forecasted to reach $46.1 billion in 2029.
• The easiest way to reduce chargeback costs is to catch disputes earlier in the process, before they become a formal chargeback. 

The number of chargebacks globally is expected to grow 37% from 2025 to 2029, reaching 359 million transactions annually, according to Mastercard’s 2026 research with Datos Insights. 

As chargebacks rise worldwide, merchants and issuers will see increases in two types of costs: 

• Direct costs (e.g., chargeback fees paid by merchants) 
• Indirect costs (e.g., operational costs associated with hiring more back-office staff to manage disputes) 

The most effective way to reduce these costs is to catch disputes earlier in the process, before they escalate into formal chargebacks. Both merchants and issuers need the right combination of insights and tools to resolve cases quickly and prevent escalation.

So, as chargebacks continue to grow, what is the true cost of a chargeback for businesses today?

A chargeback typically follows these steps:

1. Customer files a dispute with their bank due to purchase confusion, billing errors or fraud
2. Financial institution investigates and may issue a temporary credit to the customer
3. The dispute is sent to the merchant through the card network
4. The merchant responds by accepting or challenging with evidence
5. If the dispute is not resolved, it escalates into a formal chargeback, triggering additional fees and operational costs

Resolving disputes early in this process helps merchants and financial institutions avoid unnecessary costs and reduce operational strain.

Several factors contribute to the total cost of a chargeback. Although some of them are not easy to track, the chargeback benchmark data helps quantify the impact merchants and issuers face overall.

While the banks and FIs that issue cards sometimes absorb the chargeback amount, their biggest costs are operational. Handling a high volume of disputes puts a strain on the limited time and resources customer service and back-office fraud teams have available.

According to our 2025 global chargebacks outlook with Datos Insights: 

​​FIs in the United States (U.S.) must hire one full-time employee (FTE) on average for every $13,000-$14,000 of disputes annually.

For most FIs in the U.S., that works out to more than 200 back-office staff, representing millions of dollars in personnel costs every year. And each disputed transaction costs those FIs $9.08 to $10.32 to process. 

With an estimated 286 million chargebacks projected globally for 2026, this adds up to billions of dollars in total expenditures across FIs each year.

When a merchant receives a chargeback, they're not only faced with the cost of managing the dispute, but they also may absorb the cost of the associated merchandise or service, if it was already provided. So, for merchants, the cost of a chargeback depends on the chargeback amount. 

Those costs can vary significantly depending on factors like industry, market and company size. Here is a breakdown based on the 2025 research with Datos Insights:

• Industry: Travel and hospitality have the highest average chargeback amount ($120) — in part because customers often book through third-party travel services, making them less likely to reach out to the merchant directly to resolve issues, which could help avoid a dispute. The next highest chargeback amounts are in retail ($84) and high-risk categories like gambling, gaming and cryptocurrency exchanges ($99).

• Country: The U.S. leads in average chargeback amount among countries studied ($110), compared to Brazil ($94), Australia ($91) and the U.K. ($82).

However, merchants also incur operational costs related to chargebacks, including:

• Internal costs: Merchants incur an average of $82 in internal costs per chargeback, according to Mastercard and Javelin’s 2026 white paper, Chargebacks: The case for coordination. Personnel costs could be driving these expenses, especially for larger merchants. Merchants with $1 billion or more in annual revenue report $151.88 in internal costs per chargeback, nearly double the average across all merchants.
• External costs: Third-party fees cost merchants an average of $46 per chargeback, according to Javelin. Seventy-nine percent of organizations rely on third-party services to manage at least some chargeback workflows, which can also drive up external costs.

Together, these costs often exceed the total value of the item being disputed, according to the Javelin white paper. This imbalance makes chargeback costs especially burdensome.

All in, the financial impact of global chargebacks is expected to grow from $36.9 billion in 2026 to $46.1 billion in 2029, according to Datos Insights. This marks more than a 20% increase over just three years. The rise in chargebacks is driven by a few key trends, including:  

• Growing digital transactions: Digital purchase volumes are growing, especially with the rise of the subscription economy — and chargeback volumes are growing with them. That’s because chargebacks are more likely to occur on card-not-present (CNP) transactions, which represent 63% of merchants' transactions. Customers may not be able to recognize legitimate CNP charges on their bank statements, especially if they transacted through a third-party app or service. This can lead them to mistakenly initiate disputes for their own purchases.  
• Rising fraudulent chargebacks: Third-party fraud involves an unauthorized user making purchases on a card without the cardholder’s consent, while ​​first-party fraud or “friendly fraud” occurs when an authorized user knowingly disputes a legitimate purchase. The 2025 data shows both types of fraudulent chargebacks increasing, accounting for around 45% of merchant chargeback volume globally. 
• Increasing customer awareness: According to our 2026 research with Javelin, 83% of issuers believe that chargebacks are rising in part because more customers are learning that they can dispute a charge. Over three-quarters (77%) of merchants believe the dispute process is too easy, and adding more friction could help control rising costs.  

These trends affect all corners of the globe. Today, North America leads in total chargeback volume — but other regions are quickly catching up.

Together, these insights underscore what’s at stake for businesses that fail to implement best practices and adopt cutting-edge technologies to support the chargeback process.

To keep chargeback costs in check, merchants and issuers need tools that reduce both the volume of disputes and the effort required to handle the ones that still occur. The most effective platforms do this by improving speed, data quality and coordination across the dispute lifecycle.

Even when a dispute can’t be avoided, speeding up resolution reduces costs. The longer a case stays open, the more time both sides spend on repeat customer outreach, manual review and back-and-forth.

To shorten timelines, merchants and issuers need three core capabilities:

1. Shared connectivity at scale. Disputes move faster when issuers and merchants can reach the right counterpart quickly through a broad, established network instead of relying on one-off, manual outreach.
2. Richer transaction and fraud context. Access to ample fraud data, including authorization and settlement transaction data, helps teams validate what happened and make faster decisions on whether to refund, cancel, accept liability or continue the dispute process.
3. Real-time communication and action. When a merchant is alerted to a dispute in real time, they may be able to refund or cancel a fraudulent order before it’s shipped, avoiding a chargeback entirely. That’s especially important for large, expensive items like appliances, where shipping and handling can cost more than a chargeback fee — or even the merchandise itself. 

By accelerating dispute resolution, merchants and FIs can better manage operational costs, reducing the overall cost of chargebacks.

Many disputes arise from simple purchase confusion. For example, if a customer transacts through a third-party app, instead of directly with a merchant, they may not recognize the name in their statement and assume the transaction is fraudulent.  

According to our 2026 research with Datos Insights, 48% of consumers have mistakenly disputed a legitimate charge. 

In those cases, the fastest path to cost control is preventing the dispute from being filed at all. 

Issuers can reduce confusion by providing context directly within their banking apps. That could include clear merchant names and logos, geolocation data or detailed digital receipts. 

This conserves both FIs’ and merchants’ resources by helping them avoid handling (and often paying for) chargeback disputes that would otherwise be legitimate transactions.

Subscription merchants often face a high volume of chargebacks due to customers having trouble managing their recurring payments. These small-dollar disputes carry disproportionate operational costs: The initial dispute fee may outweigh the cost of the subscription service provided, resulting in an immediate financial loss.   

An accidental chargeback can also trigger fraud blocks that keep those customers from resubscribing, resulting in poor customer experience and lost customer lifetime value (CLV) — which is particularly painful given that subscription companies often must spend heavily to acquire those customers in the first place. 

Tools that connect dispute prevention to self-serve subscription controls (pause, cancel, change plan, update billing) can reduce avoidable disputes at the source and protect CLV.

Addressing rising chargebacks demands close collaboration between merchants and issuers.   

Automated tools can streamline communication and boost transparency, ensuring all parties receive the information they need — from customers reviewing their purchases in a banking app to back-office employees managing disputes.   

These solutions can ease costs and streamline operations for merchants and FIs alike, while also offering customers the types of frictionless purchase experiences that ensure satisfaction every time.  

Learn how Mastercard can help you better track, manage and resolve chargebacks throughout the payments lifecycle to improve the purchase experience and minimize disputes.