MasterCard Chargeback Reason Codes Guide

MasterCard Chargebacks

MasterCard has the second largest payment network in the world after Visa.  Millions use the card to make transactions every day, and each year, more than $2 trillion is charged to MasterCard around the world.  To prevent and successfully fight chargebacks, online merchants need a solid understanding of MasterCard chargeback reason codes.

With all of the money going through MasterCard’s networks, the company has developed specific codes in order to process the millions of chargebacks that come its way every year.

Each card network uses its own set of guidelines and reason codes for handling a payment dispute.  These codes are in place to describe the reason for the claim and provide a way to keep a detailed history of the company’s chargebacks.  Understanding the specific codes for each of the major credit card networks is the best way to get ahead of the chargeback challenge and reduce the number of refunds you issue.

Unless you have an expert management company on your side, you’ll have to handle and monitor each card network’s chargeback codes and digest the annual updates.

According to the October 2014 MasterCard chargeback reason code report, here’s what you need to know.

The MasterCard Chargeback Transaction Stages

MasterCard Chargeback Transaction Stages

Just as each card network has its own set of codes, it also has a specific process for disputing transactions.  Either the cardholder or the issuer can initiate the process.

For MasterCard, the transaction process consists of the following steps:

  1. During the first presentment stage, the company submits the transaction to the issuer or cardholder for review.
  1. The cardholder or issuer reviews the transaction and has an opportunity to dispute the first presentment. If it chooses to do so, it will contact the card issuer or merchant with the claim.
  1. At this point, either the cardholder or issuer has the option of pursuing a retrieval request, in which the party requests a copy of the sales receipt and any other documentation to use in support of the claim. This step is generally optional, since most chargebacks do not require a retrieval request.
  1. From there, the chargeback goes into full swing when the issuer or cardholder initiates the chargeback within the specified time frame and as designated by the applicable reason code.
  1. In some instances, if new information comes to light, a second presentment may take place, which entitles the claim to a new reason code, and the process begins again with a new chargeback claim. The second presentment must be processed within 45 days of the original chargeback date.
  1. If the first and second presentment processes are unsuccessful, the cardholder or issuer may choose to initiate an arbitration chargeback. In this case, the party will use an arbitrator to help settle a claim that can’t be settled through traditional methods. This must be done within 45 days of the second presentment.
  1. The acquirer of the transaction may also file an arbitration case to MasterCard in which he or she asks for a final decision of the dispute within 45 days of the arbitration chargeback filing.

Obviously, the transaction process between cardholders, issuers, and acquirers can be long and complex, but it’s one of the most common transaction issues a business will face today. Preventing any chargebacks within a corporation is virtually impossible, but understanding the process and some of the most common chargeback codes may help your firm avoid the worst of the damage.

Common MasterCard Chargeback Reason Codes

MasterCard Chargeback Codes

There are many chargeback codes that MasterCard uses in order to organize and streamline its chargeback process.  These are just a few of the most common MasterCard chargeback reason code you should know, as well as potential solutions for handling them.

  • 4802: Requested/Required Information Illegible or Missing.  This code indicates that the merchant has failed to provide all the necessary information, or some of the information is not legible.  Prevention of this one is simple: Read the instructions from the acquiring bank carefully and triple-check that all necessary documentation is included before sending.  Also, be sure to store all paper documentation in a place that’s safe from water or fire damage, and avoid writing things by hand.
  • 4808: Requested/Requiring Authorization Not Obtained.  Here, the charge did not go through because of authorization issues.  This is common when authorization is invalid or incorrect (wrong account information, pin, etc.), the transaction was processed after authorization for the card was declined, the account number doesn’t match any numbers on the acquirer’s file, or the card has expired.  The best solution is to avoid conduction account information transactions over the phone, since that’s the most likely scenario for human error.  In addition, don’t override declined transactions and always be sure to double-check the account information details before processing the card.
  • 4831: Transaction Amount Differs.  In this instance, the cardholder will file a dispute stating that the merchant billed an incorrect amount for the purchase authorized.  It can also happen if the cardholder disputes the method of payment used.  To prevent this chargeback reason, avoid making any changes to the transaction amount without the cardholder’s consent, and triple-check all calculations before processing the final amount.  Void the first transaction if the cardholder wishes to use a different means of payment.
  • 4834: Duplicate Processing:  If the same transaction was billed more than once, MasterCard will use this reason code to describe it.  Avoid this by working in ones.  Only submit the transaction and a copy of the sales receipt once.  Don’t submit the transaction to more than one acquirer, and void the transaction if the cardholder decides to use a different form of payment.
  • 4837: No Cardholder Authorization:  The cardholder may claim that the transaction was processed without proper authorization.  This is a common indicator of fraud, but it can also signify an honest mistake.  Avoid this by not accepting expired cards as payment, and not overriding declined or voided cards.  Match the signature on the back of the card to the cardholder’s ID, and make an imprint of the card when processing manual transactions, if possible.
  • 4840: Fraudulent Processing of Transactions:  This code will be used if a cardholder who has made a purchase with a certain merchant in the past claims that a fraudulent purchase was made while the card was in the cardholder’s possession at the time of the transaction.  Carefully monitor employee activity to find the source of the fraud, and always void transactions that are processed more than one time.
  • 4841: Cancelled Recurring Transactions:  The cardholder may claim that the merchant continued to bill the card after a recurring transaction was cancelled or without explicit notification to the cardholder.  Constant communication with the customer can significantly reduce these chargebacks as well as a transparent, no-strings attached cancellation policy.
  • 4853: Goods or Services Defective/Not as Described:  Cardholders will often claim that the goods or services were defective or improperly marketed, which entitles them to a chargeback.  Honest and transparent marketing will reduce this problem, as will proper packaging and shipping.  It’s also wise to create a simplified return process for damaged goods in order to cut customer dissatisfaction and reduce the hassle of handling the chargeback.

Thanks for following the Chargeback Gurus blog. Feel free to submit topic suggestions, questions or requests for advice to:

New Call-to-action