A residential contractor posted on r/Contractor that he had split a job into three card payments through Square: a deposit, one at start, and the balance at completion. All three cleared. Then, a week after he finished, the customer claimed the work had damaged her septic tank and reversed the final payment. He was out $4,000.
He had done everything he was told to do. In the thread he listed it: a contract, an invoice for each payment, and a receipt of payment. The top replies told him to file a mechanics lien and sue, advice that skips what he was asking and that may already have been unavailable to him.
A chargeback is not a late payment and it is not a collections problem. The money is already gone, a bank you have no relationship with will decide who keeps it, and you have roughly a week to make your case.
What actually happens the moment it is filed
The customer calls their bank, the bank creates a formal dispute on the card network, and that immediately reverses the payment. Stripe's documentation describes it plainly: the network pulls the funds and the dispute fee from Stripe, and Stripe debits your balance for the payment amount plus the fee. Nobody asks your permission and nobody calls you first.
Two consequences catch contractors out.
First, the funds are held for the entire dispute, and Stripe puts the full lifecycle at two to three months. Even a clean win is a quarter of a year with the money out of your account.
Second, emptying the account does not help. Under that same r/Contractor thread, a commenter offered the standard trade-shop workaround: move money out of Square the moment it lands. Square's own documentation closes that door. If your Square balance does not cover the disputed amount, Square debits the linked bank account for it. The balance is not a shield, it is the first place they look.
Watch out
If your processor balance is short when a dispute lands, the money comes out of your business checking account instead. On a five-figure job that can hit payroll the same week, which is why a dispute is a cash flow event before it is a paperwork event.
The two clocks, and the one that ends your week
Contractors consistently misjudge both directions of the timeline. The customer's window is far longer than they expect, and their own is far shorter.
Their clock. Card networks generally allow cardholders 120 days from the original payment. For services specifically, Stripe's documentation notes that when a customer pays for a future event or service, the dispute window starts on the service date, not the payment date. Visa's services-not-received rule follows the same logic, running 120 calendar days from either the transaction date or the last date the customer expected delivery, subject to an outer limit of 540 days.
Read that against how trades actually take money. A deposit collected in March for a June installation is not safe in July, because the clock on it starts in June. A contractor who books six to eight weeks out is carrying a dispute window months longer than the one in their head.
Your clock. After the chargeback is created, Stripe says you have "a limited time to respond to the card issuer: usually 7-21 days." Square is more specific and more brutal: seven days from the notification email. A notification that arrives on a Friday while you are on a roof is a real risk of losing by default, and a default loss is unappealable.
| Stage | Typical timing | Source |
|---|---|---|
| Customer files | Up to 120 days, from service date for services | Stripe disputes documentation |
| Visa services-not-received outer limit | 540 days from processing | Visa reason code 13.1 rules |
| Your response window | 7 to 21 days by network | Stripe disputes documentation |
| Square response window | 7 days from notification | Square dispute walkthrough |
| Issuer evaluates evidence | 60 to 75 days | Stripe disputes documentation |
| Full lifecycle | 2 to 3 months | Stripe disputes documentation |
Read the reason code before you write a word
Every dispute arrives with a code, and the code tells you what claim you are actually rebutting. Contractors lose winnable cases by answering the wrong question, usually by submitting a passionate account of how good the work was against a claim that has nothing to do with quality.
Three categories cover almost everything the trades see.
Unauthorised or fraudulent transaction. The customer says they did not make the charge. On a job you completed at their address this is normally what the industry calls friendly fraud, and Visa's own published guidance puts friendly fraud at around 20% of all fraudulent disputes globally, rising to about 30% for high-volume online merchants. Your rebuttal is identity and authorisation: the signed contract, the address match, the text thread from their number, prior payments on the same card.
Services not provided. The customer says the work never happened or was never finished. Your rebuttal is completion evidence with dates attached. Worth knowing: under Visa's rules for this code the cardholder must attempt to resolve with the merchant first and tell their bank they did. If they never called you, say so, and show your number was on every invoice.
Not as described or defective. The customer says the work was done badly or was not what was agreed. This is the scope-disagreement case and the one the trades lose most often, because the argument is about what was promised. Your rebuttal is the written scope and the change orders, not photographs of tidy work.
Tip
Match the evidence to the claim. If the code says unauthorised, lead with proof that this person authorised this charge. If the code says not as described, lead with the signed scope. A general portfolio of nice job photos answers neither.
There is a structural lever here worth more than any evidence file. When you dip or tap a chip card on a compliant terminal, counterfeit fraud liability generally sits with the issuing bank rather than with you. Key a number in over the phone or email a payment link and you have made it a card-not-present transaction, which leaves the unauthorised route wide open. One operator on r/smallbusiness described a $9,000 Square invoice disputed as "unauthorised" a month later. Taking the card at the truck on the last day closes off a category of claim that emailing a link leaves open.
Decide in the first hour: fight, accept, or pre-empt
Not every dispute is worth contesting, and the economics differ by processor in a way that should change your decision.
Square charges nothing for dispute management and returns the disputed funds and the processing fees when you win. Stripe charges a dispute fee that, in its own words, it never returns, plus a separate countered fee if you fight, refunded only on a win. As one owner put it on r/smallbusiness: you pay to receive the dispute, and if you fight and lose you are out both fees.
That produces a simple rule. On Square, contest almost everything, because the only cost is your time. On Stripe, contest anything material and think twice on balances close to the fee stack.
Two decisions that are not close:
Do not plan to refund your way out. Once the dispute is open you cannot. Stripe states directly that you cannot issue a refund outside the dispute process while a dispute is open. Your only paths are evidence or acceptance. The cheap exit has to be taken before the filing, which is the whole argument for answering an unhappy customer's call on the day.
Do not rely on the customer withdrawing it. Customers often promise to call the bank and cancel. Stripe is unambiguous that even when a customer claims to have withdrawn the dispute you must still respond with evidence for it to close in your favour.
On American Express or Discover you may get an inquiry first, a request for information before a formal chargeback. Visa and Mastercard no longer use that phase. Answer inquiries immediately: Stripe warns that failing to respond signals implicit acceptance and escalates the case into a formal, likely unwinnable, chargeback.
Most lost disputes are lost in the filing cabinet, not at the bank. A custom CRM that timestamps the signed authorisation, the change orders, the arrival and completion photos and the customer's own approval messages against the job record turns a seven-day evidence scramble into a five-minute export.
The evidence a trade has that an online seller does not
Generic chargeback advice is written for ecommerce, where the case rests on a tracking number. You are in a far stronger position, and most contractors never use it, because the evidence sits on three different phones and nobody has assembled it.
What actually persuades an issuer, roughly in order of weight:
- The signed work authorisation, showing scope, price and payment terms, dated before the work started.
- Signed change orders for anything added, which is the entire case in a not-as-described dispute.
- Timestamped arrival and completion photos, ideally with location data intact. Before-and-after pairs from the same angle are more persuasive than a gallery.
- Crew arrival and departure times from your scheduling or time tracking system, which independently corroborate that people were on site on the days you claim.
- The customer's own words, the single most underused asset. A text saying "looks great, thanks" beats any photograph. The r/Contractor owner had a contract and invoices, but the strongest thing he could have held was the customer approving the finished work in writing before the septic claim appeared.
- Material receipts and supplier invoices tied to the job.
- Delivery or completion sign-off, plus the final invoice and payment receipt.
- A record that they never contacted you, if true, since several reason codes require the customer to try you first.
One caution against overconfidence. Strong evidence improves your odds, it does not guarantee anything. A motel operator on r/smallbusiness contested fraud claims with signatures, driver's licence copies, timestamped CCTV of the guest on the premises and texts telling them to charge the card, and still lost. Another seller lost holding carrier tracking and proof of delivery. Build the best file you can, submit it on time, and do not bet the month's cash flow on the outcome.
The chargeback ratio advice you have been given is wrong for you
Search for chargeback guidance and you will be told to keep your ratio under 1% or risk losing the ability to accept cards. For a contractor that framing is close to useless, and acting on it means worrying about the wrong threat.
The card networks run merchant monitoring programs with two conditions that must both be met. Visa's program, after the tightening that took effect on 1 April 2026, flags a US merchant as excessive at a 1.50% ratio and at least 1,500 combined fraud and dispute items in a calendar month. Mastercard's excessive tier starts at 100 chargebacks in a month and a 1.50% ratio.
Run your own numbers against that. A contractor doing thirty card transactions a month will never reach 100 disputes, let alone 1,500. Below those floors you are not identified under the network programs at all, however ugly your percentage looks. One chargeback on thirty jobs is a 3.3% ratio and a rounding error to Visa.
So what should worry you? Your processor. Acquirer risk limits are consistently stricter than the network floors, and they look at exposure rather than percentages. A single $12,000 dispute on an account settling $40,000 a month is a large uncovered risk to the company holding your funds, and the response is not a fine, it is a rolling reserve, delayed deposits, or offboarding. A merchant on r/smallbusiness found a clause holding 10% of every sale in reserve for six months on a new account, exactly the term that gets applied when risk teams get nervous.
By the numbers
Both network programs require a ratio and a monthly count: at least 1,500 items for Visa's excessive tier, at least 100 chargebacks for Mastercard's. A thirty-job-a-month contractor is below both floors permanently. Your merchant account risk comes from your processor's own limits, not from the networks.
One related myth worth killing: winning does not clean your record. Networks count a dispute when it is received, not when it is resolved. Fighting recovers revenue and does nothing to your ratio. Only stopping the filing does that, which is why the pre-dispute phone call is worth more than the evidence package.
Your lien clock does not wait for the dispute
This is the trap that costs contractors the most and appears in almost no chargeback guidance, because the people who write chargeback guidance sell software to online stores.
Mechanics lien deadlines generally run from the last day you furnished labour or materials. They do not run from the day you found out you were not getting paid. In Texas the residential deadline is generally the 15th day of the third month after the month work was last furnished. A contractor who asked Levelset this exact question, having finished in October and been charged back roughly six months later, was told the statutory filing window had already closed by the time the dispute arrived.
Put the two timelines side by side. The customer can file up to 120 days out. A residential lien window in several states closes in under 90. The dispute can arrive after your strongest remedy has already expired. And because everything looked fine right up until the reversal, you had no reason to preserve a right you did not know you needed.
The response takes ten minutes. The week a dispute lands, look up your state's lien deadline and calculate it from the last day on site, not from today. If the window is open and the amount is material, file or send a notice of intent while you fight the chargeback. The two processes are independent and pursuing one does not forfeit the other. If it has closed, you still have breach of contract, small claims and collections.
For anything you are still working on, the cheaper fix is upstream: progress payments and a deposit that covers the material order mean the balance exposed to a late dispute is small enough that losing it does not matter much.
The prevention checklist that actually moves the number
Ranked by how much each one reduces real losses, not by how easy it is to write on a policy page:
- Take the card in person on the last day. Dip or tap on a compliant terminal and counterfeit fraud liability moves to the issuer, removing a whole reason code that emailed links leave open.
- Never take a large final balance by card. Card the deposit and progress payments; take the final on cheque or bank transfer, which have no chargeback mechanism.
- Get written approval of the finished work before you invoice the balance. One text saying it looks good is your best single piece of evidence and costs nothing to ask for.
- Put a real phone number on every invoice and answer it. Several reason codes require the customer to try you first, and most disputes start because calling the bank was easier than calling you.
- Sign a change order for every addition, however small. Scope disagreement is the category the trades lose, in the gap between what was said and what was written.
- Make your merchant descriptor your trading name. A charge the customer does not recognise becomes an unauthorised claim automatically.
- Photograph arrival and completion with timestamps intact, from consistent angles, on every job.
- Keep a float in the processor account, or a short balance comes straight out of your checking.
- Diarise your lien deadline at the end of every job, before you have reason to think you will need it.
None of this is difficult. All of it depends on the records existing in one place with dates attached, which is the actual failure mode. The contractor in the opening thread had a contract, invoices and receipts and was still out $4,000, because a folder of documents is not a dated, job-linked record of what was agreed, what changed, when the crew was there, and what the customer said afterwards.
One more thing about winning
Winning ends the dispute, not necessarily the problem. A small business owner on r/smallbusiness won a chargeback with signed consent forms and before-and-after photos, then had the customer's parent demand a refund within 48 hours while threatening negative reviews, a BBB complaint and licensing board reports.
Decide in advance where your line is. Winning the money and losing three months of local reputation is a bad trade in a business that runs on referrals. On a small balance with a customer who is going to make noise, the commercially correct answer is sometimes to pay to make it end. Just make that a choice you priced rather than a reflex, and make it before the dispute is filed, while a refund is still something you are allowed to do.
The seven-day window is only frightening when the evidence lives in six places. We build custom CRMs for contractors where the signed scope, every change order, crew timestamps, job photos and the customer's approval messages all hang off the job record, so responding to a dispute is an export rather than an archaeology project. It is the same record that stops the cash flow surprises further upstream.