Visa Chargeback Guidelines: A Guide for Merchants
How to file for and process a chargeback differs depending on the entity you are dealing with. Here's an explanation of Visa chargeback guidelines for online Visa card transactions.
Visa has made several recent changes thanks to the digital explosion of transactions and merchandizing. Competition among online retailers is rampant, with companies creating increased flexibility for their customers, including allowing them to compare products, features, and pricing across multiple retailers in virtually no time.
With convenience becoming more mainstream for all businesses, customers are getting used to requesting a chargeback, whether on basis of fraud or simply because they didn’t like the product. As a result, Visa has designed several regulations to keep the flow of chargebacks in check.
The chargeback process
Every time a chargeback is handled, it goes through the same process. Here are the steps to be followed:
The cardholder will contact the bank in order to dispute a transaction or the issuing bank will detect an irregularity and return the transaction to the acquiring bank for review
The issuing or acquiring bank will review the cardholder claim. If the claim is found to be invalid, the chargeback will either not be filed by the issuing bank or will be reversed by the acquirer. If they find it to be valid, it will be sent to the acquiring bank for review, a temporary refund will be issued to the cardholder, and the merchant will lose the money for the transaction and be subject to a small fee
At this point, evidence and proper documentation will need to be produced, either by the acquirer or the merchant, in order to legitimize the claim
If enough evidence is not brought forward, the merchant or cardholder may repeal the decision and the process begins again with a pre-arbitration case
The compelling evidence will then be brought forward either in favor of the cardholder or in favor of the merchant. The case will then advance to arbitration where the card network provides a final decision
This is the process that every card company follows when working through a chargeback, and understanding it will help you understand the guidelines associated with each card company.
The significance of reason codes
Anytime a chargeback is processed, it is accompanied by one of Visa’s reason codes. These codes inform all relevant parties exactly why the transaction is being disputed. The codes make it simpler for Visa to organize the many chargebacks they deal with on a regular basis. Every company has their own set of reason codes and regulations that go with it, but here is a general overview of some of the most common Visa reason codes:
- 60, 75, or 79: Non-receipt of information
- 57, 62, 81, 83: Fraud
- 71, 72, 73, 77: Authorization error
- 74, 76, 80, 82, 86, 96: Processing error
- 41, 53, 85: Canceled or returned funds
- 30, 90: Non-receipt of goods or services
For a detailed list of Visa chargeback guidelines, rules and codes, browse their guide.
Deadlines and fees
The entire chargeback process is run by deadlines that must be followed in order for Visa to honor the chargeback. Each reason code has its own time limit, but as a general rule, the consumer’s filing deadline is 120 days, the merchant’s filing deadline is 45 days, and the issuer’s pre-arbitration chargeback filing deadline is 45 days.
There is also a fee for each disputed transaction. In most cases, the fee is very small, but in extreme instances it can be between $20 and $100 depending on the reason code and merchant’s situation. The fees will also increase if Visa deems that a certain company has processed chargebacks in excess.
Visa Chargeback Penalties
In an effort to reduce the number of chargebacks it has to process, Visa will invoke a penalty on companies that receive too many chargebacks, landing them in the Merchant Chargeback Monitoring Program (MCMP). This program is for those that exceed 100 transactions, 100 chargebacks, and 1 percent or more chargeback ratio in a given month.
The company then has three months to reduce the number of chargebacks. Meanwhile they will be subject to hefty fines that can amount to as much as $25,000 per month. If the merchant continues to process excessive chargebacks for nine months after being placed in the MCMP, it may be permanently disqualified from accepting Visa transactions, per Visa chargeback guidelines.
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