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  3. Friendly Fraud & Chargeback Fraud

What is the difference between friendly fraud and chargeback fraud?

The main difference between chargeback fraud and friendly fraud is the cardholder's intent for filing a dispute.

In chargeback fraud, the cardholder is operating under malicious intentions and is purposefully attempting to commit fraud against a merchant. For example, a cardholder may authorize a card-not-present (CNP) transaction and will file a dispute in order to earn their money back. Basically, the cardholder is abusing the dispute process in order to receive their shipped goods at no expense on their end.

Friendly fraud involves no malicious intentions, but instead just simple misunderstanding. For example, a cardholder's relative may have made a transaction without informing the cardholder. The cardholder has mistaken the charge as a fraudulent transaction, only to find out the transaction was legitimate--and it was made by their relative.

The distinction matters because it’s the difference between mending a customer relationship and blacklisting them.