TL;DR
Each Stripe chargeback costs $15 in fees plus the full transaction amount. High dispute rates (over 0.75-1%) can lead to account termination. Fraud prevention is not optional. Use Stripe Radar, 3D Secure, and velocity checks. A $50/month investment in fraud prevention can save thousands in chargebacks and keep your account active.
$15 Stripe dispute fee per chargeback (plus you lose the transaction amount) Source: Stripe Pricing Documentation
The True Cost of a Stripe Chargeback
When a customer disputes a charge, the visible cost is the $15 Stripe fee. The real cost is much higher:
This means a $100 fraudulent transaction actually costs you nearly $200. And that is before considering the risk to your Stripe account.
Stripe Account Termination Risk
Stripe monitors your dispute rate closely. Exceed their thresholds and you face serious consequences:
| Dispute Rate | Status | Consequences |
|---|---|---|
| Under 0.5% | Healthy | No action required |
| 0.5% - 0.75% | Warning | Stripe may reach out, suggest improvements |
| 0.75% - 1% | High Risk | Monitoring program, potential reserve requirements |
| Over 1% | Critical | Account termination, funds held, card network fines |
Worst case: If Stripe terminates your account, you may be added to the MATCH list, making it extremely difficult to get approved by any payment processor. Some startups have waited months to find a new processor willing to work with them.
Common Fraud Patterns for Startups
Card Testing
Fraudsters use small transactions to test if stolen cards work. They might make many $1 charges to see which cards go through, then make larger purchases with working cards.
Stolen Card Purchases
Fraudsters use stolen card details to purchase digital goods or services. Digital products are preferred because there is no shipping address to verify.
Friendly Fraud
Legitimate customers who dispute charges they actually made. Common with subscriptions where customers forget they signed up or find cancellation difficult.
Account Takeover
Attackers gain access to legitimate customer accounts and make purchases using saved payment methods.
Prevention Strategies
Use Stripe Radar
Stripe Radar is included free for most accounts and catches many fraudulent transactions automatically. For higher-risk businesses, Radar for Fraud Teams ($0.05-0.07/transaction) provides more control.
Implement 3D Secure
3D Secure adds an authentication step for card payments. It shifts liability for fraud to the card issuer and significantly reduces chargebacks. Use it for:
- High-value transactions (over $100)
- New customers with no purchase history
- Transactions flagged as medium-high risk by Radar
Velocity Checks
Monitor for unusual patterns:
- Multiple purchases from same IP in short time
- Many declined transactions followed by a successful one
- Same card used with different email addresses
- Unusual geographic patterns
Verify Customer Identity
- Require email verification before processing payments
- Use address verification (AVS) and CVV checks
- For subscriptions, require account creation with verified email
- Consider phone verification for high-value accounts
Quick win: Simply enabling email verification and adding a trial period for subscriptions can eliminate 80%+ of fraud from bots and low-effort attackers.
Cost of Fraud Prevention
| Prevention Tool | Cost | Fraud Reduction |
|---|---|---|
| Stripe Radar (basic) | Free (included) | 50-70% of obvious fraud |
| Stripe Radar for Teams | $0.05-0.07/transaction | Custom rules, better control |
| 3D Secure integration | Free (engineering time only) | 70-90% liability shift |
| Email verification | Free or minimal | 80%+ of bot fraud |
| Custom velocity limits | Engineering time | Card testing prevention |
Balance is key: Too much fraud prevention creates friction that loses legitimate customers. Start with basic measures and add more only if needed. Monitor your decline rate alongside your fraud rate.
How much does a Stripe chargeback cost?
Each Stripe dispute costs $15 in fees, plus the full transaction amount is withdrawn from your account. If you lose the dispute, you lose both the fee and the payment. Even if you win, you still pay the $15 fee and spend hours on documentation.
What happens if my Stripe chargeback rate is too high?
If your dispute rate exceeds 0.75%, Stripe may place you in a monitoring program. Above 1%, you risk account termination. Card networks like Visa have similar thresholds. Losing your Stripe account can take weeks to recover from and may affect your ability to use other payment processors.
How can I prevent Stripe fraud?
Use Stripe Radar for fraud detection, implement 3D Secure for high-risk transactions, verify billing addresses, require CVV codes, and watch for velocity patterns (multiple failed attempts). For subscriptions, verify email addresses and use trial periods to identify fraudsters before they cause damage.
Can I fight Stripe chargebacks?
Yes, you can submit evidence to dispute chargebacks. Include delivery confirmation, customer communication, IP logs, and usage data. Win rates vary by dispute type, but typically range from 20-40%. Digital goods are harder to defend than physical products with delivery confirmation.
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