Friendly Fraud: Why Subscription Charges Get Disputed and What the Card Networks Say

Visa's definition is that friendly fraud is when a cardholder disputes a legitimate transaction that they made or someone in their household made. Visa says it is often called first-party misuse because, unlike third-party fraud, no stolen credentials are involved. Mastercard uses the same pairing of terms and the same contrast with a criminal using someone else's identity.

Both networks describe a range of motives. Mastercard says first-party misuse is sometimes an honest mistake: the cardholder forgot the purchase, the merchant billed under an unfamiliar name, or a child used the card without permission. In other cases the customer is intentionally trying to get credit for a transaction they authorized.

Visa lists the forms it sees. They include household misuse, where a family member uses a saved card; descriptor confusion, where the cardholder does not recognise the merchant's name on a statement; attempts to keep goods without paying; and abuse of return policies. Visa also mentions a cardholder claiming a subscription was cancelled when it was not.

The table lists the figures found in Visa's and Mastercard's own publications, with the base each one uses. Read the third column before comparing any two rows.

The spread has a simple cause. Nobody can observe intent. A figure for friendly fraud is an estimate by a merchant, an issuer or a survey respondent of how many disputes were raised by the genuine cardholder. Some figures cover all merchants and some cover one category, and the older ones predate the network programs described below.

We found no figure from either network for the share of subscription disputes specifically that are friendly fraud in 2025 or 2026. The 75% figure is from a 2020 survey that Mastercard cites without naming.

Visa names recurring billing models among the places where friendly fraud is especially common, because customers may forget about renewals and dispute legitimate charges. It also names digital goods and subscription services, where proof that an order was fulfilled can be hard to establish.

Visa made the same observation about trials in 2019. In the bulletin announcing its free-trial rules, it said cardholders often forget or do not understand that they agreed to future transactions when they enrolled, and that they find it difficult to cancel.

Mastercard's April 2026 e-book describes the customer's side. When transactions are confusing, 74% of customers in its study contact their bank. Among those who met an unfamiliar purchase in the past year, 45% did their own research online or in their banking app first. The publication's argument is that clearer purchase details in the banking app reduce disputes.

Visa adds a structural point. It says simplified bank dispute processes sometimes allow claims with minimal verification, and that merchants increasingly say issuers' processes can make it easier to submit and win fraudulent claims.

Federal regulation gives credit card holders a dispute process. Regulation Z defines a billing error to include a charge not made by the consumer or by a person with authority to use the card, and a charge for property or services not accepted or not delivered as agreed. A consumer who sends a billing error notice within 60 days of the statement need not pay the disputed amount while the creditor resolves it.

The card networks' own rules recognise valid subscription complaints. Visa's guide says charges processed after a valid cancellation are typically considered invalid. Visa's rules give issuers a dispute right where a customer bought through a trial and was not clearly advised of further transactions.

So the label depends on the facts. A customer who cancelled and was billed again has a real claim. A customer who forgot a renewal that was clearly disclosed and then says the card was stolen is the case the networks mean by first-party misuse. From the merchant's side the two can look identical on the day the dispute arrives, and the record of what the customer agreed to and did afterwards is what separates them.

Visa noticed the inconsistency in 2019. Its bulletin said issuers were raising disputes about post-trial charges as fraud, as cancelled recurring or as goods and services not received. It expanded the misrepresentation condition to give those disputes a defined home.

The classification decides what a merchant can do. Visa's merchant FAQ on Compelling Evidence 3.0 notes that subscription disputes are often classified as cancelled recurring. That matters because Compelling Evidence 3.0, Visa's main remedy for first-party misuse, applies only to the fraud condition.

Mastercard groups chargebacks into four categories in its public guide: fraud-related, authorization-related, point-of-interaction error and cardholder disputes. No cardholder authorization sits in the fraud category. Cardholder dispute of a recurring transaction sits in the cardholder disputes category.

Visa's Compelling Evidence 3.0 took effect for responses processed on or after 15 April 2023. It lets a merchant answer a card-absent fraud dispute with at least two earlier undisputed transactions from the same cardholder that share identifiers such as an IP address or device ID. Visa's guide says it does not guarantee any outcome.

Visa's guide also describes two early resolution tools. Order Insight lets participating merchants share transaction details with issuers when a cardholder questions a charge, which may resolve confusion before a dispute. Rapid Dispute Resolution lets a merchant set rules to resolve eligible disputes automatically; accepting one transfers financial liability to the merchant.

Mastercard announced First-Party Trust in March 2024. Merchants can submit data at the time of purchase or once a dispute arises, and Mastercard combines it with its own network analytics to look for signs of first-party misuse. In June 2025 Mastercard said the program was expanding beyond the United States and that it brings new rules defining compelling evidence, including chargeback protection for disputes that meet its data-sharing requirements. Mastercard describes participation as optional.

The burden sits with the seller in the meantime. Mastercard's 2024 article states that for remote transactions, including online purchases and automatic billing, the burden of proof lies with the merchant.

Those two figures come from Mastercard's April 2026 e-book, which cites a January 2026 report by Javelin and Mastercard. They are averages across the merchants in that study. A single low-priced renewal can therefore cost more to contest than it is worth.

Volume is rising on the networks' own forecasts. The same e-book cites a Mastercard projection that global chargebacks will reach 334 million by 2028, from 263 million in 2025. A Mastercard press release of June 2025 forecast the global cost of chargebacks to retailers at 42 billion dollars by 2028, with nearly half reported as fraudulent.

There is a second cost on Visa. Fraud reports and disputes both count toward the ratio in Visa's acquirer monitoring program. Visa's fact sheet lists two exclusions: disputes resolved through pre-dispute tools and fraud reports that qualify for Compelling Evidence 3.0. It does not list disputes the merchant later wins.

Visa's guide tells merchants to review the billing descriptor regularly and make sure it matches the brand name customers see during the purchase. It advises confirming cancellations in writing with the effective date, and keeping records of cancellation requests, confirmations and service usage.

Both networks require or recommend messages around the charge. Visa's rules require a notice at least seven days before a recurring transaction when a trial or promotional period is ending. Mastercard's 2022 summary lists a confirmation email at enrollment, a receipt after every billing, an online cancellation method and a notice before annual billings.

None of this proves intent in a particular case, and none of it stops a determined customer from filing a false claim. It reduces the honest-confusion share and leaves the merchant with a record for the rest.

• A billing descriptor that matches the name the customer saw at checkout
• A confirmation at sign-up that states the recurring terms
• A reminder before a trial ends and before an annual renewal
• A receipt for each charge that says how to cancel
• An online cancel option, and a written confirmation of each cancellation
• Stored login, device and usage records tied to each transaction