Customer Chargeback After a Partial Refund – Now What?

Under normal circumstances, chargebacks aren’t too complex. A purchase has a value, the customer disputes the charge, and that value is clawed back from your accounts and returned to the customer. You pay penalties and fees as a merchant.

The common method to fight chargebacks is to offer a refund instead. Ideally, the customer accepts; they just want their money back, and most of them don’t care which particular process causes it. Meanwhile, a refund avoids those chargeback fees and penalties, so it’s better for you as a merchant.

It’s relatively rare that a customer explicitly wants to punish a company and refuses to accept a refund to cancel the chargeback. It doesn’t happen, though.

Beyond all of this, though, you can end up in much more complicated situations.

Partial Disputes and Refunds

What happens when only a part of the transaction is up for dispute?

This can happen for a lot of different reasons.

• The customer made an order for five items but only four were delivered.
• The customer made an order for two of an item, but only received one.
• The customer made an order for three items, but one was damaged or broken.
• The customer made an item for one item, but was charged for two.

There are a few ways that this can be handled.

You can issue a full refund and eat the loss. This is generally not the go-to option, since there’s not really a reason to eat the cost on items you successfully delivered and the customer is satisfied with.

You can issue a partial refund. Identifying the cost of the lost, damaged, unfulfilled, or overcharged items, and issuing a refund for the value lost, is the go-to solution in these kinds of cases. It’s easy to do in just about every merchant dashboard, and as long as you’re in communication with the customer, they’ll usually accept the partial refund.

Often, this solution is accompanied by some bonus to the customer. You might ship out a replacement item for free or at a discount. You might offer some additional store credit or a discount code to make their next purchase smoother. It varies by the circumstance.

Sometimes, though, a customer doesn’t want to go through your customer service, or they’ve tried and found it to be not worth the effort.

• Maybe your automated customer service doesn’t have clear options for this kind of resolution.
• Maybe an AI customer service agent isn’t capable of responding in the appropriate way.
• Maybe your customer service is broadly unavailable or difficult to reach.
• Maybe they don’t believe you’ll honor your policies, or an exception that puts them technically outside of them, even with a valid issue.
• Maybe you’re demanding an inordinate burden of proof, like a police report for a $5 item.

Whatever the case is, they might file a dispute with their bank instead of working with you for a refund, partial or otherwise.

Customers can dispute the full value of a transaction, and most chargebacks do exactly that. They can, though, dispute only the amount of the transaction that was inappropriate. If they were accidentally double-charged, they can dispute half of the charge. If they ordered two items and only one arrived, they can dispute half the cost.

These partial disputes function in exactly the same way as a full dispute. While the specific details can vary from payment processor to payment processor, the overall outline is the one you’ll be familiar with.

What Happens if the Customer Disputes the Full Transaction After a Partial Refund?

A rare but possible situation can occur when wires get crossed, messaging gets mixed, or simply due to fraud.

Imagine a situation where a customer has an issue that would, normally, be resolved by a partial refund. Any of the situations above will do. They reach out to you, the issue is discussed, and you submit a partial refund as per your resolution process.

At this point, you have a customer who is somewhat irate that they’re having issues at all. You’ve issued a refund that, according to your policies, is appropriate; a partial refund for the cost of the missing or damaged items, or the value of an over-charge, or what have you.

What happens if the customer decides that isn’t enough? Maybe they want to further punish you. Maybe they don’t see the refund (either because it didn’t process yet or because their bank doesn’t organize it the way they expect in their statement), and they think you aren’t holding to your end of the bargain.

Sometimes, these customers file a dispute, despite the discussions and resolution offered via a partial refund.

They can file a partial dispute or a full dispute. A partial dispute would likely be for the same amount offered as resolution (or for the full value of the missing item or over-charge, if your refund was deemed insufficient), while a full is obviously the full transaction.

What happens in this situation?

The “good” news is that fighting these chargebacks is the same as fighting any other chargeback, and that holds true whether it’s a partial or a full dispute. You’ll need to go through representment.

The Flip Side: Disputes Before Requesting Refunds

To turn things around, sometimes a customer will file their dispute before they reach out to request resolution. Some customers do this as a backup, so they’re sure to get their money if your service proves obstinate. Others might have changed their mind or been convinced to at least reach out.

More commonly, you receive the dispute notice and pending chargeback, and you have a short window to reach out and try to resolve the situation with the customer.

Either way, you want to try to ensure that the dispute is cancelled before you submit a refund. Otherwise, the timing is likely to line up such that the dispute claws back the funds before the refund is processed, then the refund is processed, and you’re out twice the money.

Ideally, you will be able to reach out to the payment processor and have one of the two (either the refund or the chargeback) cancelled so you aren’t double-billed for the issue. Unfortunately, this process can take weeks, so it’s best to avoid the situation whenever possible.

How to Win a Dispute After a Partial Refund

This all comes down to the same things it usually does: proof.

In this case, since you’ve already talked to the customer and landed on the partial refund, you have ample proof. If the customer disputed the full charge, you have chat logs or emails that prove they were fine with at least some of the order and didn’t dispute it all.

It’s worth mentioning that sometimes a customer might submit a full dispute when they only want to dispute a small part of the transaction. Some banking apps don’t make it easy to do a partial dispute, and their dispute process seems like just a yes/no flag.

At the same time, this is an increasingly common method of first-party fraud. A customer makes a multi-item order, then they file a request for a partial refund and a dispute for the full amount. Their goal is to get the full dispute processed, occasionally with AI-generated “evidence”, and then get the partial refund processed anyway in that timing gap. Their idea is that the partial refund is small enough you won’t fight it and will just write it off.

Either way, giving information to the payment processor after a dispute is filed will get you the best outcome. So, what do you include?

• Details of the original order. What was ordered, when, what order numbers, what tracking numbers, and all of that information. This is standard to every representment.
• Details of the dispute. What is the customer claiming? What dispute did they file, and does it match what they’re claiming?
• Details of the actions taken. You issued a refund and have proof that you did, so present that.

All of this can be formatted as a timeline. What date did the customer reach out? When did you submit your refund, and when did they file the dispute? It doesn’t have to be lengthy or detailed.

“November 10: Customer contacted support about partial delivery.

November 11: Customer agrees to partial refund. Refund processed via Square.

November 15: Chargeback received with error code ___.

November 16: Refund acknowledged by customer.”

Since disputes and representments are investigated by real people, a simple timeline helps show what happened and in what order.

This is also an opportunity to check whether or not the refund posted appropriately. A common problem here, for example, is that you submitting the refund doesn’t necessarily mean the customer has their money back. Delays in processing and posting the funds can mean it can be several days before the customer sees their money back. If they get antsy, especially if their chargeback window is closing, they might pull the trigger on the dispute just in case.

Ideally, one of two things will happen. Either the customer will notice the refund was processed and cancel the dispute, or the payment processor will reinvestigate, see that the refund was processed, and will rule in your favor.

In rare cases, poor timing or policies can mean you end up on the hook for the chargeback anyway. This is a big part of why one of the most common pieces of advice is to avoid issuing a refund until after the customer cancels their dispute. The good news is, if this happens, you can often get the chargeback rescinded, though you will have to reach out to the payment processor to discuss the issue. Avoiding it is generally the better option, when possible.

Preventing Unnecessary Chargebacks after Refunds

Sometimes, a chargeback following a refund is a case of fraud. Some scammers know that banks will often err on the side of the customer rather than the merchant, and that timing issues can mean an opportunity for them to get both a refund and a chargeback.

In most cases, though, it’s a simple case of wires getting crosses and timing going wrong.

You can do a few things to make this less likely to occur.

• Notify the customer as soon as you process a refund. Provide them with a case number and a timeline. Since refunds can take 3-7 days to process, make sure they’re aware of this before they get worried about not getting their money back.
• Notify the customer again when the refund is fully processed. You will know when the refund is closed out, which means the money should be in their account and visible.
• Request that a customer cancel any pending disputes before the refund can be issued. Since this is the biggest driver of accidental double-chargebacks, getting confirmation of the dispute being cancelled is important.

It’s also a good idea to follow up with the customer once the refund has been processed. A simple email saying something like “Your refund should be fully processed now. If it isn’t, or if there are any other issues, please respond with your case number and we’ll investigate” can be a proactive way to ensure proper customer service, and fewer financial issues.

Using Fight Disputes

One powerful tool in your arsenal is proactive dispute notifications. When you use my service, you will be notified within minutes of when a customer files a dispute with their bank. You have a lot more time and leeway to reach out, figure out a solution, and have that solution processed before the payment processors do their investigation and turn the dispute into a chargeback. It’s one of the best options you have to minimize chargebacks and eliminate double-chargeback or partial-chargeback problems.

You still need to be good at reaching out and responding to customers, and your customer service needs to be good and empowered to make these decisions. I can help with that as well, through my managed replies service, so you can get the best outcomes as reliably as possible.

Give me a call, and let’s talk about what I can do for you.