Understanding Payment Disputes and Chargebacks
What is a Payment Dispute?
A payment dispute (also called a chargeback) occurs when a donor contacts their bank or credit card company to contest a charge, rather than requesting a refund directly from your organization. This triggers a formal dispute process through the payment gateway (Stripe) that differs significantly from standard refund procedures.
Best Practices for Prevention
Include a note in donation flow about how charges might appear on billing statements
Make your refund policy clear and accessible
Respond quickly to donor inquiries about charges
How Disputes Differ from Regular Refunds
When a donor files a dispute through their financial institution instead of requesting a refund directly, it bypasses normal refund channels and creates a more complex process. Unlike a simple refund that you can process immediately, disputes must go through the payment processor's formal chargeback procedure.
Who Returns the Funds in a Dispute?
When a donor reports transactions as fraud through their financial institution, Stripe (the payment gateway) handles the dispute process. The funds are initially held by Stripe during the investigation. Depending on the outcome of the dispute:
If the dispute is ruled in favor of the donor, Stripe returns the funds to the donor from the held amount
If ruled in your favor, the funds are released back to your organization
Why Disputes Create Challenges
Financial Impact
Stripe charges dispute fees of $15-25 per case
Funds are held during the investigation, which can create cash flow issues
Processing these disputes takes time away from your mission
Administrative Burden
Disputes create extra work for everyone involved:
The donor must work through their bank's dispute process
Your organization must respond to the dispute, gather evidence, and provide documentation
The payment platform must manage the case administratively
Account Health
Accumulating too many disputes can negatively affect your standing with Stripe, potentially leading to higher processing fees or account restrictions.
Recommended Process for Dispute Requests
When a donor contacts you about wanting to dispute a transaction or claims a charge is fraudulent:
Respond promptly and professionally - Most disputes arise from confusion or billing concerns that can be resolved through communication
Offer to process a direct refund - Explain that you can issue a refund immediately, which is:
Faster for them (no waiting for bank investigation)
Free of dispute fees
Simpler for everyone involved
If they've already filed a dispute - Ask if they're willing to cancel it with their bank so you can process a standard refund instead
Document everything - Keep records of all communications in case you need to respond to a formal dispute
Process the refund quickly - Once they agree, issue the refund promptly to demonstrate good faith
When Disputes Have Already Been Filed
If a donor has already initiated a dispute through their financial institution, reach out to them directly if possible. Explain that:
You're happy to resolve the issue with a direct refund
Canceling the dispute and accepting a refund is faster for them
This approach avoids unnecessary fees and complications
If the donor agrees, they can contact their bank to withdraw the dispute, and you can process a normal refund.
How Goodworld Prevents Disputes
We ensure your organization name appears clearly on billing statements wherever possible
Our platform sends confirmation emails immediately after donations are processed
We answer support calls on the number listed on billing statements
With Goodworld's preventive measures, and by offering donors direct refunds, you can maintain positive donor relationships while protecting your organization from unnecessary fees and administrative burden.