American Express Chargebacks

Table of Contents

1. How Are American Express Chargebacks Different?
2. How Do American Express Inquiries Work?
3. Can Merchants Fight AMEX Chargebacks?
4. Can You Prevent American Express Chargebacks?
5. How Long Do AMEX Disputes Take?
6. Why Do Merchants Hate American Express?

When talking about chargebacks most of the discussion tends to revolve around the policies of Visa and Mastercard. Between the two of them, these card networks are responsible for most of the credit and debit card transactions in the United States, and therefore most of the chargebacks as well. Their policies are also broadly similar. When Visa makes major changes to their chargeback rules, Mastercard often follows suit in order to avoid causing confusion and alienating merchants.

Because so much of the focus is on Visa and Mastercard, however, merchants can sometimes find themselves going in blind when they receive a chargeback from another card network such as American Express. This can sometimes cause merchants to make major missteps when responding to a chargeback, since the way American Express handles disputes can differ from Visa and Mastercard in a number of ways. What do merchants need to know about American Express chargebacks, how to fight them, and how to prevent them from happening in the first place?

Because they carry higher interchange fees, not every merchant accepts American Express cards. Those that do are sometimes well rewarded, however, since American Express cardholders tend to make much larger purchases on average than those using Visa or Mastercard.

American Express has often targeted a more affluent segment of the population, offering a variety of perks for cardholders in exchange for charging higher fees than most credit cards.

Merchants who cater to a similar customer base often accept American Express as a matter of course, since many of their customers will carry those cards.

If you do accept American Express cards—or if you’re considering it—it’s important to learn how their dispute process works. The rules and processes can be different from those of the two largest card networks, and the best chargeback management strategy takes into account even the small quirks of how different card networks treat chargebacks.

While American Express recently started allowing certain banks to issue American Express cards, much of the time it acts as its own issuer. For better or worse, this often allows for a shorter, more streamlined chargeback process.

American Express cardholders generally have 120 days from the transaction date to dispute a charge, but this deadline can be extended for certain dispute categories, such as “goods not received.”

American Express limits cardholders to no more than two dispute filings per charge, so customers can't abuse the chargeback system by filing the same dispute repeatedly.

The second allowed dispute is intended to give a second chance to customers who file a good-faith dispute without fully understanding what evidence is required to win. Since American Express chargebacks allow each party to submit evidence only once, a cardholder who wants to submit additional evidence must file a new dispute. This system does occasionally create extra work for merchants who have to respond to the same dispute twice, however.

When a cardholder contacts American Express to dispute a charge on their account, one of two things will happen. Most of the time, when a cardholder has sufficient reasoning or evidence that the charge was unauthorized, American Express will give them an immediate, upfront chargeback. If it’s less clear that the cardholder has a valid claim, American Express will send an inquiry to the merchant.

If the merchant accepts the chargeback or fails to respond with sufficient supporting evidence within 20 days, the chargeback will be granted, end of story. If they do provide evidence, and if the issuer finds that evidence sufficient to resolve the issue, a chargeback will not be filed.

The inquiry process allows merchants a fair amount of time to review and respond to disputes. Unfortunately, merchants may find that in practice, the inquiry process isn’t used all that often. It’s more common for cardholders to receive immediate chargebacks, and merchants who are considered “high risk” or have been placed in chargeback monitoring programs may be denied the inquiry step entirely.

On the other hand, American Express has made efforts in recent years to reduce the number of customer complaints that result in chargebacks.

As both card network and issuing bank, American Express typically has access to more detailed transaction information, and can provide that  information to customers who call to dispute a charge they don't recognize.

This process is similar to programs offered by Visa and Mastercard and can prevent many unrecognized charge disputes from becoming chargebacks.

According to American Express, data from 2019 showed a 63% reduction in non-fraud disputes that were sent to merchants, as compared with 2016. The changes implemented over this time period include the two dispute limit per charge, the 120-day limit on filing a chargeback, the ability to provide cardholders with more information about unrecognized transactions, and reduced signature requirements.

American Express doesn’t have a codified pre-arbitration or arbitration process. In other words, you get one shot to stop an American Express chargeback, so make it count.

In practice, an immediate chargeback isn’t all that different from an inquiry. The merchant still has 20 days to respond, and can get the chargeback reversed by providing sufficient documentary evidence that the charge was valid and the cardholder doesn’t have a legitimate claim.

American Express has its own set of chargeback reason codes, and they refer to situations that correspond to Visa and Mastercard reason codes you may already be acquainted with. Merchants should review these codes, track which ones they receive, and respond to inquiries and chargebacks with the appropriate supporting evidence relevant to each code.

Remember, if you have already issued a refund or credit over a transaction in dispute, proof that you did so may be all the evidence you need to provide.

American Express provides some general advice for merchants about how to avoid chargebacks, which should already be known to most merchants who’ve struggled with chargebacks in the past:

• Inform customers about your return and refund policy
• Make sure the business name that appears on card statements is recognizable
• Follow all recommended security and authorization procedures (American Express provides various security tools, such as SafeKey, that can afford merchants some protection from true fraud chargebacks)
• Keep thorough transaction records for at least 12 months.

American Express chargebacks may be handled differently than Visa or Mastercard chargebacks, but they happen for the same reasons. Prevention advice that works for one kind of chargeback will work for others.

The best way for merchants to develop a truly effective chargeback prevention strategy is to analyze their chargeback data and identify the root causes that are responsible for the majority of their chargebacks.

This will show them what they need to address most urgently, whether it’s marketing copy that’s misleading customers, a refund policy that’s excessively restrictive, problems with your shipping methods, or whatever it might be. When you know what’s causing your chargebacks, you can address those problems directly, strengthening your business in the process.

Expanding the list of payment options you’ll accept can help you acquire new customers and grow your business, but every new payment option opens up a new front in your battle against chargebacks. While many of the best preventive practices are universal, you have to have specific knowledge of the rules, time limits, and other critical elements of the dispute process for every payment method you accept. Otherwise, when chargebacks start coming in, you might not be in a good position to respond effectively.

Keeping track of all of these different rule-sets can be challenging, so don’t forget that you never have to face chargebacks alone. Companies like Chargeback Gurus can bring their expert knowledge to bear on all types of chargebacks, helping you take whatever steps are necessary to protect your revenue and keep your chargeback rate down.

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