Consumers Exploit 'Friendly Fraud' in Online Transactions
The number of transaction disputes filed by consumers has surged, causing financial strain on small businesses through lost goods and increased fees.
Consumers are increasingly leveraging credit card protections, known as 'friendly fraud,' to reverse legitimate purchases. This practice, where customers obtain goods for free by disputing a charge, has seen a significant rise.
American consumers initiated 158 million transaction disputes in 2025, a 29% increase from 2021. This growth far outpaces the overall increase in card transactions, according to Bloomberg.
While some disputes are genuine—stemming from forgotten purchases or missed return windows in online shopping—a substantial portion is deliberate. Evidence includes social media tutorials guiding shoppers on how to use chargebacks for free merchandise.
Small businesses are disproportionately affected by these losses compared to large retailers, who can absorb costs by raising prices. Each successful fraudulent dispute costs a merchant the product, the revenue, and a penalty fee, in addition to the labor involved in contesting the claim. This trend places a significant burden on smaller operations unable to absorb these additional expenses.