A chargeback is when a client’s bank reverses a credit card charge, pulling money out of your account and returning it to the client. For Canadian freelancers accepting credit card payments through Stripe or PayPal, chargebacks are a real operational risk. Here is how they work, what they cost, and how to win them.
How Chargebacks Work
When a client disputes a credit card charge with their bank, the bank reverses the transaction and initiates a chargeback process. Money is pulled from your Stripe or PayPal account (sometimes before the dispute is resolved). You then have a defined window to submit evidence proving the charge was legitimate.
The entire process involves the client’s bank, the card network (Visa/Mastercard), and the payment processor (Stripe or PayPal). You, the freelancer, have the right to respond but no direct relationship with the client’s bank.
Chargeback Fees
| Processor | Dispute/Chargeback Fee | Refunded If You Win? |
|---|---|---|
| Stripe | $15 CAD | Yes — fee returned if you win |
| PayPal | ~$20 USD (~$27 CAD) | No — fee kept regardless of outcome |
Beyond the fee, the chargeback amount is held from your account until the dispute is resolved — which can take 4–8 weeks.
Common Chargeback Reasons (and What to Expect)
- “Item not received” / “Services not rendered”: Client claims they did not receive what was invoiced. This is the most common fraudulent chargeback type for service freelancers. Proof of delivery (emails confirming delivery, screenshots, file transfer records) is usually decisive.
- “Not as described”: Client claims the work did not match what was agreed. A detailed, specific contract and written scope is your defence.
- “Unauthorized transaction”: Client claims they did not authorize the charge. Unusual — typically only applies when a card was genuinely compromised, not a dispute about the service itself.
- Friendly fraud: Client initiates a chargeback despite receiving the service, hoping to get their money back. Common enough that payment processors take it seriously as a category.
How to Win a Chargeback Dispute
When you receive a chargeback notification in Stripe or PayPal, you have a limited window (typically 7–21 days depending on the processor and card network) to submit evidence. The strongest evidence:
- Signed contract or written scope: The most powerful document. A contract signed by the client defining what was agreed and what was delivered.
- Email thread with the client: Full email conversation showing the client approved the work, requested the invoice, and received delivery confirmation.
- Proof of delivery: Screenshots of delivered files, login records, completion emails, client feedback on the work.
- Invoice with client’s payment authorization: The payment confirmation email showing the client approved the charge.
- Communication after delivery: Any post-delivery communication showing the client acknowledged receipt — even a “Thanks, looks good” email is evidence.
Prevention: Why Strong Contracts Win Most Disputes
The single best chargeback prevention for freelancers is a clear, signed contract before starting work. Contracts establish:
- What will be delivered
- Timeline and milestones
- Payment terms and non-refundability of deposits
- Revision limits
- What constitutes project completion
A signed contract + email trail showing delivery makes “not as described” and “services not rendered” claims much harder to win for a dishonest client.
Why e-Transfer Eliminates Chargeback Risk
Interac e-Transfer deposits are final — once received and deposited, they cannot be reversed by the sender’s bank. There is no chargeback mechanism for e-Transfer. This is one of the strongest arguments for encouraging Canadian clients to pay by e-Transfer rather than credit card.
Frequently Asked Questions
Does a refund prevent a chargeback?
Not automatically. A client can initiate a chargeback even after receiving a refund, though this generally fails if you can show the refund was processed. If a dispute arises, issue refunds proactively only if you are confident the client will not file a chargeback anyway — a refund does not always close the dispute window.
Can my Stripe account be closed due to too many chargebacks?
Yes. Stripe monitors chargeback rates and will terminate accounts with rates above ~0.75–1% of transactions. For most freelancers who carefully vet clients and use contracts, chargebacks are rare enough that this is not a concern. If you do experience elevated disputes, review your intake process — chargebacks often cluster around specific client types or project categories.
What if I lose the chargeback?
The funds go to the client and you pay the dispute fee. If the chargeback was fraudulent (the client got the service and filed anyway), you can pursue the debt through civil means — but for most freelancers, the cost of small claims court exceeds the disputed invoice amount for small projects. Prevention through contracts and e-Transfer preference is more effective than dispute recovery.