What is Chargeback insurance / guarantee?
Third-party product reimbursing merchants for approved orders that later chargeback as fraud, in exchange for a percentage of protected volume.
Chargeback insurance, sometimes termed a chargeback guarantee, is an outsourced service mitigating the financial impact of fraudulent chargebacks for merchants.
A third-party provider, not the acquiring bank, assumes liability for specific fraud-related chargebacks against approved transactions, typically those where the merchant has provided a full fraud screening response (e. g. , AVS and CVV matching).
In return, the merchant pays a fee, typically a percentage of the sales volume protected by the service, to the insurance provider.
Merchants typically integrate with these providers via an API, sending transaction data for real-time risk assessment and a ‘guarantee’ decision.
If the provider guarantees a transaction and it subsequently results in a fraud chargeback (Reason Code 4837, 6037, or similar scheme fraud codes), the provider reimburses the merchant for the disputed amount, absorbing the financial loss.
A common operational error is assuming all chargeback types are covered; these services are generally limited to fraud chargebacks and do not extend to service-related disputes or other non-fraud reason codes.
Related terms
A forced reversal of a card payment initiated by the cardholder's issuing bank.
A chargeback filed by a real cardholder for a transaction they actually made, often because they don't recognise the descriptor or want a refund without contacting the merchant.
The merchant's response to a chargeback, with evidence that the original transaction was valid.
Related guides.
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