Merchants know that the holiday shopping season is make-or-break. Without the vital influx of transactions between Black Friday in November and the New Year celebrations in January, many companies would struggle to meet their revenue goals. However, a rising tide lifts all boats – as transactions surge, so do chargebacks.
The 2024 holiday season proved to be a record-breaker, with U.S. consumers spending $282 billion online and global online spending reaching $1.2 trillion. But with this growth came unprecedented challenges: returns increased 28%, with $122 billion worth of holiday purchases returned globally. For merchants, this translated into a chargeback wave that continued well into the new year.
This article reveals exactly why seasonal chargebacks are so impactful, and how to prevent them from damaging your business in the upcoming 2025 holiday season.
Want to know what you can expect when it comes to chargebacks in the coming holiday season? We’ve analyzed hundreds of thousands of chargebacks from last year to understand the direction of travel. Read the full findings in our exclusive Holiday Chargebacks Report!
📈 Chargebacks Will Surge During the Holiday Season
Any increase in transactions typically leads to a subsequent rise in chargebacks, and the holiday season is no exception. Industry data shows that average order value grows by 30% during the holiday season, and conversion rates rise by 60%. The 2024 holiday shopping period saw retail sales reach $994.1 billion (November-December), growing 4% year-over-year, while eCommerce sales grew an impressive 9.5% to approximately $267 billion.
This represents sustained growth that experts expect will continue into 2025, though merchants should note that the 2024 season was particularly compressed – the shortest since 2019, with only 27 days between Thanksgiving and Christmas. This condensed timeline intensified both transaction volumes and operational pressures.
You might imagine that chargeback rates rise proportionally with transactions. However, they actually rise faster during the holiday season. Justt’s retail customers saw a 40% increase in chargebacks during the 2023 holiday shopping period, and 2024 data shows the trend accelerating. Disputes for fraud reason codes spiked most significantly, followed by increases of “not as described” disputes.
More concerning still, the average transaction value for chargebacks increased from $165 in 2023 to $169.13 in 2024. As the true cost of a chargeback is often 2.5X the transaction amount, including the price of goods lost, shipping costs, and card scheme penalties, this simultaneous increase in both chargeback volume and chargeback amount can have a potentially catastrophic impact on merchants.
The Post-Holiday “Hangover” Effect
Here’s what many merchants don’t anticipate: the worst is yet to come. January and February are peak months for chargebacks, as most disputes occur 45-60 days post-purchase. This means that while you’re enjoying the revenue boost from holiday sales in December, a wave of chargebacks is building that will hit your business in early 2025.
This “holiday hangover” is particularly challenging because it arrives just as businesses are recovering from the operational strain of the peak season. With holiday purchases carrying a 17.6% return rate, and 16.5% of those returns involving fraud, the post-holiday chargeback surge can seriously impact Q1 profitability.
Why Do Chargeback Rates Rise Faster Than Transactions During the Holiday Season?
While the seasonal rise in transaction volumes offers a partial explanation for seasonal chargeback surges, there are other factors at play that account for disproportionate numbers of chargebacks in November, December, and January. These include:
Impulse buying: Factors such as limited-time deals, the pressure to keep up with family and friends, and seasonal marketing tactics appealing to emotions such as nostalgia and a sense-of-belonging, all trigger impulse purchases. In turn, impulse purchases can quickly trigger buyers’ remorse, which results in illegitimate ‘friendly fraud‘ chargebacks.
Time-sensitive gifts: Cardholders who leave gift purchases to the last minute will often be disappointed if their items fail to arrive when they had hoped, even if a merchant has specified that delivery may take longer. In these cases, cardholders may file illegitimate chargebacks out of frustration.
Unhappy customers: Heightened emotions surrounding gifts also lead to chargebacks. If a gift fails to impress, or the cardholder discovers that the recipient already has the item, they may request an illegitimate chargeback in order to recoup costs.
Rushed purchases: Holiday shoppers often make quick decisions under time pressure, which can lead to misunderstandings about product details or return policies. These misunderstandings may later result in illegitimate chargebacks.
Billing descriptor confusion: According to the 2024 Chargeback Report, one-third of cardholders find billing descriptors confusing or unrecognizable. During the holiday season, when consumers make numerous purchases across different merchants, this confusion intensifies, leading to cardholders filing disputes for transactions they simply don’t remember making.
Social media influence: The spread of information on social media about how to exploit the dispute process has increased the temptation to misuse chargebacks. Combined with the fact that 84% of customers feel chargebacks are more convenient than refunds, and 72% don’t understand the difference between the two, this creates a perfect storm for friendly fraud.
Direct to dispute behavior: A troubling 53% of cardholders dispute transactions without contacting the retailer first. During the hectic holiday season, when customer service response times may be slower, this percentage often increases as frustrated customers opt for what they perceive as the faster resolution path.
⚠️ When it Comes to Chargeback Disputes, Your Existing Resources Will Be Stretched to the Limit
Just as chargeback rates rise higher than expected during the holiday season, dealing with them also becomes more demanding than anticipated. This is partly because this surge in disputes coincides with a period when businesses are already operating at peak capacity, creating a perfect storm that can overwhelm even the most prepared merchants.
But it’s not quite that simple. Let’s look at precisely why seasonal chargebacks can be so challenging.
Maintaining Quality at Scale is Not Always Straightforward
As the volume of chargebacks increases, the quality of responses often decreases due to the time and labor required to address multiple disputes. This can prove problematic at any time of the year. For instance, if a popular product is discovered to be faulty, merchants may face a wave of chargebacks, causing extra work for their employees, who must gather evidence and revise card scheme rules.
However, the holiday season amplifies this issue significantly. Disproportionately high chargeback rates for large transaction volumes can cause surges that may overwhelm your existing staff. These surges are usually unpredictable and may take time to filter through, leading to lasting pressure on in-house teams.
In turn, this pressure typically leads to a dramatic reduction in chargeback response quality. Even highly skilled in-house teams tend to miss deadlines, fail to account for regulatory change, and submit generic, undetailed responses when dealing with unusually high chargeback volumes.
This situation naturally produces suboptimal win rates that may result in fees, penalties, fines, and reputational damage for your business. With the average merchant win rate standing at just 45%, and dispute rates having increased 78% year-over-year in recent quarters, the stakes have never been higher.
🚫 Prevention Strategies for Seasonal Chargeback Surges
Despite the numerous challenges presented by seasonal chargebacks, all hope is not lost. To mitigate some of the impact of holiday season disputes, merchants should consider the following strategies:
Implement clear communication and policies: Ensure that your return policies, shipping times, and product descriptions are clearly communicated to customers to reduce misunderstandings. With 72% of consumers confused about the difference between chargebacks and refunds, clarity is essential.
Check and clarify billing descriptors: Since confusing billing descriptors are the leading cause of chargebacks among cardholders surveyed, review your payment processor settings to ensure your business name appears clearly on customer statements. Consider adding a recognizable phone number or website URL.
Store all relevant transaction data and communications with cardholders: Maintain comprehensive records of all transactions and customer interactions, as this information can be crucial in disputing illegitimate chargebacks. Documentation is your strongest defense.
Enhance fraud prevention measures: Implement or upgrade fraud detection tools, such as AVS and CVC, to identify and prevent potentially fraudulent transactions before they result in chargebacks. With online fraud growing 15% in 2024 and reaching approximately $48 billion in losses, robust prevention is critical.
Implement chargeback alert programs: Chargeback alerts notify merchants before disputes occur, allowing you to issue refunds and take action early. These programs can significantly reduce the number of chargebacks that reach the representment stage.
Prepare for shipping delays: Partner with reliable shipping providers and clearly communicate potential delays to customers, especially as the holiday deadline approaches. Set realistic expectations from the outset.
Implement a proactive customer service strategy: Reach out to customers proactively about their orders, especially for high-value or time-sensitive purchases, to address any issues before they escalate to chargebacks. Remember that 53% of cardholders skip merchant contact entirely – don’t give them a reason to.
Educate your customers: Create clear FAQs and post-purchase communications that explain your refund process and encourage customers to contact you directly with any issues. Make it easier to reach you than to file a chargeback.
🤨 How to Deal with Seasonal Chargebacks When They Do Happen
Even the best laid plans go awry, and this includes seasonal chargeback prevention strategies. Despite the potential efficacy of measures listed above, the emotion-driven nature of many seasonal chargebacks means surges remain likely, and when they happen, scalability will be your main challenge.
Here, we’ll explore your options for dealing with this problem when it arises.
The Manual Approach: Scale Existing Resources
One approach to managing seasonal chargeback surges is to scale existing processes. This involves building extra capacity by hiring and training additional staff, implementing more robust procedures for evidence collection, and taking additional precautions to ensure timelines are met.
In theory, this solution allows merchants to handle increased volumes while maintaining quality. However, this manual approach comes with significant challenges.
Accurately predicting required capacity is difficult; overestimating leads to idle resources during slower periods, while underestimating leaves merchants unprepared for sudden surges. The substantial time and financial investment needed for training additional staff and implementing new procedures can also prove daunting, especially when there is no guaranteed return.
Given that the 2024 holiday season was particularly compressed – creating even more intense pressure in a shorter timeframe – and with chargeback amounts and volumes both rising, the manual approach is becoming increasingly untenable for most merchants.
The Automated Approach: Scale Hands-Free
Another increasingly popular approach to seasonal disputes is to invest in a chargeback management solution that leverages automation, making scale a non-issue. Recent data shows that companies using representment software saw net recovery rates more than 55% higher than those managing the process internally.
Automation allows you to process huge volumes of chargebacks without compromising on quality, ensuring that each dispute is handled with the same level of attention to detail. This scalability is particularly valuable during the holiday season when chargeback volumes can spike unexpectedly.
While template-based solutions will still require oversight and manual effort, Justt’s AI-driven system is completely hands-free. No human intervention means no human errors, which are often exacerbated during high-stress periods like the holiday rush. This means you no longer have to worry about missed deadlines, formatting issues, or rule changes that could potentially harm your case.
AI-powered automation can also adapt quickly to changing patterns in chargeback behavior, which can prove unpredictable throughout the holiday season. By leveraging artificial intelligence and machine learning, advanced automated solutions can identify trends in dispute types and adjust strategies in real time, improving win rates over time.
✨ Justt’s Fully-Automated Solution Self-Optimizes as it Scales
Justt’s Dynamic Arguments feature offers a state-of-the-art approach to automated chargeback management. The system continuously collects data from payment service providers, merchants, and third-party sources. With access to over 500 data points, Justt autonomously crafts expertly informed representments tailored to each specific dispute, without requiring any merchant intervention.
This data-driven strategy allows Justt to create compelling arguments that address the nuances of each chargeback case, such as specific reason codes, the issuer’s preferences, and the unique circumstances of the transaction. This permits merchants to maintain high win rates even during peak seasonal periods when chargeback volumes surge and internal resources are stretched thin.
Justt’s AI-driven solution continuously learns and adapts, utilizing A/B testing to improve its performance over time, and as much as doubling chargeback wins within weeks. By analyzing patterns in your holiday season chargebacks, Justt’s system becomes increasingly effective at identifying and combating seasonal friendly fraud, dramatically reducing the overall impact on your business.
Automating Compelling Evidence for Chargebacks with Dynamic Arguments
The 2024 holiday season demonstrated just how severe chargeback surges can be, with record returns, dispute rates increasing 78% year-over-year, and the added complexity of a compressed shopping calendar. As we head into the 2025 holiday season, the question isn’t whether you’ll face a chargeback surge – it’s whether you’ll be prepared for it.
While it might be cold outside, you don’t want to be worrying about an avalanche of chargebacks over Christmas dinner. Use chargeback automation to focus on what matters during the holiday period – whether that’s driving sales, improving customer experiences, or simply enjoying some well-deserved peace and quiet.
