Despite it’s name, “friendly fraud” isn’t kind at all. Today we are going to discuss the three different types of “friendly fraud” chargebacks that will impact your business.

First on the list is “Mistaken Fraud”. Most people who have owned a credit card have seen a charge on their bank statement and panicked because they didn’t know who the charge was from. Here’s a real-life example that just happened to me:

The other day I login to my bank account to pay my card and I see a charge for $48.72 from “ALI BABA”. Being that I have NEVER ordered from Alibaba.com I immediately assumed my credit card numbers were stolen, AGAIN.

After a little research I discovered that this charge is actually from a party store in Detroit Michigan that is called something like “Metro Place Party & More” and sure enough, I had stopped there and purchased a couple bottles of wine, so the charge was 100% legitimate. With that being said, when a charge on your card does not match the name of the merchants business it creates a lot of confusion. I assume Metro Place has a sky-high number of chargebacks, all due to their name appearing as the Chinese juggernaut, Alibaba(.com)

Mistaken Fraud is an innocent type of fraud. I legitimately believed someone stole my credit card and used it to buy some fake Nikes from Alibaba.com. Thankfully I did not file a chargebacks because I would have knowingly hurt a small business who sold me wonderful wine.

The second type of Friendly Fraud is “Shared Card Fraud”. Lets say you allow your daughter to use your card to buy an LOL Surprise Doll on eBay. Months pass and you check your statement and see a charge for $8.99 in the Google Play Store. You may rush to call the bank and close the card without realizing your daughter used your card to buy the newest Barbie movie. Is this “fraud”? No. Instead of filing a chargeback and closing the card you should have a long talk with your daughter about frivolously abusing your card (trust me, we have had this talk with both of our sons after they racked up $400 in PS4 purchases). Have your kid do some extra housework or rake the leaves to “earn” the money they spent. Then, do what we did and sign your kids up for the FREE Chase Family First Debit card for kids ages 6+ (NO monthly fees! NO minimum balance requirement!)

And the last type of “friendly fraud” is the worst. This type is also known as “Hostile Fraud”, so, yeah, there IS such thing as “Hostile Friendly Fraud” (which is also an oxymoron because you can’t be hostile yet friendly). This is when someone flat out lies in effort to get reimbursed. The reason could be because they have buyers remorse or that they never planned on paying for it to begin with. For example, let’s say your return policy is “7 Days” and the buyer contacts you two months after it was delivered. You tell them that the return policy has elapsed so you will not be able to accept a return on the bra they purchased. The buyer then files a chargeback claiming the purchase was “Unauthorized” even though the buyer is well-aware that they bought the merch and violated the Return Policy. 

The seller is 99.99% likely to win a Friendly Fraud chargeback IF the correct response is filed with the merchant.  Next read our series about Winning a Credit Card Dispute:

Complete Guide to Fighting and Winning a Credit Card Chargeback Dispute

Tips for Winning a Chargeback Credit Card Dispute