Chargeback Help - What is a Chargeback?
We've seen a wave of chargebacks hit merchants across the country, and we don't see any reason why that will change at the beginning of 2021. With that in mind, we wanted to provide the ultimate chargeback guide to help merchants with chargebacks: how to define chargebacks, how to manage and recover chargebacks, and how to prevent chargebacks in the future.
We've seen an astronomical rise in the frequency chargebacks are requested since the beginning of the pandemic and while chargebacks can be convoluted, they don't have to be.
If you have any questions about how to protect your business from chargebacks, please feel free to reach out to us directly.
Table of Contents
- What is a chargeback?
- What is the difference between a dispute and a refund?
- Why were chargebacks created?
- When were chargebacks created?
- How do chargebacks work?
- What is the chargeback process?
- What timeframe do merchants have to dispute chargebacks?
- How many chargebacks occur annually?
- Are chargebacks growing?
- How do I file a chargeback?
- Why do consumers file chargebacks?
- Why did I get a chargeback?
- When can a cardholder legitimately use a chargeback?
- What are chargeback reason codes?
- American Express Chargeback Reason Codes
- Visa Chargeback Reason Codes
- Mastercard Chargeback Reason Codes
- Discover Chargeback Reason Codes
- What are True Fraud chargebacks?
- What are Friendly Fraud chargebacks?
- What are Merchant Error chargebacks?
- Who is liable for chargebacks?
- How do EMV chips impact chargebacks?
- What is EMV Liability Shift?
- Are retail merchants liable for chargebacks?
- Are Card-Not-Present Merchants liable for chargebacks?
- What is the chargeback threshold?
- Should I dispute chargebacks?
- How do I write a chargeback rebuttal letter?
- What is Chargeback Representment?
- Can you prevent all chargebacks?
- How long do I have to fight a chargeback?
- How much are chargeback fees?
What is a chargeback?
What is the difference between a dispute and a refund?
Why were chargebacks created?
When were chargebacks created?
The dispute process laid out in the law wasn't called a "chargeback", but it laid out the process that would become the chargeback process. While the process was not yet called a chargeback, it would become the foundation for the dispute system we know today.
How do chargebacks work?
What is the chargeback process?
- Cardholder disputes a transaction with their issuing bank who then extends provisional credit.
- Issuing bank sends a retrieval request to the acquiring bank to obtain additional information.
- Acquiring and issuing banks resolve the dispute if possible, otherwise the acquiring bank transmits a chargeback notification to the merchant.
- Merchant either accepts the chargeback or fights it by resubmitting the charge along with the necessary evidence to disprove the claim through representment. *Note: A rebuttal letter summary must always be included.
- Issuing bank will review the new evidence and make a final decision. If they find in favor of the merchant, the provisional credit will be reversed and returned to the merchant.
- At this point, any party unhappy with the decision can request further review, which puts the chargeback process into the pre-arbitration phase. *Note: The back-and-forth of the pre-arbitration and arbitration phases can last for months, and arbitration fees adding up to hundreds of dollars must be paid to the card networks.
- If banks cannot come to an agreement during pre-arbitration, the process enters arbitration. The card network will examine the evidence and make a final decision.
What timeframe do merchants have to dispute chargebacks?
Time limits vary based on the credit card network and the reason code. Note that the timer begins when the chargeback is initiated, not when the merchant is notified, so your timeframe may not be the exact limit provided by the card network.
How many chargebacks annually?
Are chargebacks growing?
How do I file a chargeback?
The bank will typically give you a provisional credit for the amount of the charge while they investigate the validity of the claim. Be prepared to describe the problems you’ve had with the merchant and the steps you’ve taken to resolve the matter.
Why do consumers file chargebacks?
Why did I get a chargeback?
When can a cardholder legitimately use a chargeback?
What are chargeback reason codes?
• True fraud
• Friendly fraud
• Merchant error
American Express Chargeback Reason Codes
|Chargeback Code||Authorization Errors|
|A01||Charge Amount Exceeds Authorization Amount|
|A02||No Valid Authorization|
|A08||Authorization Approval Expired|
|Chargeback Code||Type: Fraud|
|F22||Expired or Not Yet Valid Card|
|F24*||No Card Member Authorization|
|F29||Card Not Present|
|Chargeback Code||Type: Card Member Dispute|
|C02||Credit (or Partial Credit) Not Processed|
|C04||Goods/Services Returned or Refused|
|C08||Goods/Services Not Received|
|C14||Paid by Other Means|
|C18||“No Show” or Card Deposit Cancelled|
|C28||Cancelled Recurring Billing|
|C31||Goods/Services Not as Described|
|C32||Goods/Services Damaged or Defective|
|M10||Vehicle Rental - Capital Damages|
|M49||Vehicle Rental - Theft or Loss of Use|
|Chargeback Code||Type: Processing Error|
|P01||Unassigned Card Number|
|P03||Credit Processed as Charge|
|P04||Charge Processed as Credit|
|P05||Incorrect Charge Amount|
|P22||Nonmatching Card Number|
|Chargeback Code||Type: Inquiry Related Chargeback|
|Code||Type: Chargeback Programs|
|FR2||Fraud Full Recourse Program|
|FR4||Immediate Chargeback Program|
|FR6||Partial Immediate Chargeback Program|
Visa Chargeback Reason Codes
|Chargeback Code||Chargeback Reason|
|10.1||EMV Liability Shift Counterfeit Fraud|
|10.2||EMV Liability Shift Non-Counterfeit Fraud|
|10.3||Other Fraud — Card Present Environment|
|10.4||Other Fraud — Card Absent Environment|
|10.5||Visa Fraud Monitoring Program|
|11.1||Card Recovery Bulletin|
|12.2||Incorrect Transaction Code|
|12.4||Incorrect Account Number|
|12.6||Duplicate Processing/Paid by Other Means|
|13.1||Merchandise/Services Not Received|
|13.3||Not as Described or Defective Merchandise/Services|
|13.6||Credit Not Processed|
|13.8||Original Credit Transaction Not Accepted|
|13.9||Non-Receipt of Cash or Load Transaction Value|
Mastercard Chargeback Reason Codes
|Chargeback Code||Chargeback Reason|
|4801||Requested Transaction Data Not Received|
|4802||Requested / Required Information Illegible or Missing|
|4807||Warning Bulletin File|
|4808||Requested / Required Authorization Not Obtained|
|4812||Account Number Not on File|
|4831||Transaction Amount Differs|
|4835||Card Not Valid or Expired|
|4837||No Cardholder Authorization|
|4840||Fraudulent Processing of Transaction|
|4841||Cancelled Recurring Transaction|
|4846||Correct Transaction Currency Code Not Provided|
|4847||Requested / Required Authorization Not Obtained and Fraudulent Transaction|
|4849||Questionable Merchant Activity|
|4850||Credit Posted as Purchase|
|4853||Cardholder Dispute – Defective / Not as Described|
|4854||Cardholder Dispute – Not Elsewhere Classified (U.S. Region Only)|
|4855||Non-receipt of Merchandise|
|4857||Card-Activated Telephone Transaction|
|4859||Services Not Rendered|
|4860||Credit Not Processed|
|4862||Counterfeit Transaction Magnetic Stripe POS Fraud|
|4863||Cardholder Does Not Recognize — Potential Fraud|
|4870||Chip Liability Shift|
|4871||Chip / PIN Liability Shift|
|UA01||Fraud – Card Present Transaction|
|UA02||Fraud – Card Not Present Transaction|
|UA05||Fraud – Chip Counterfeit Transaction|
|UA06||Fraud – Chip and PIN Transaction|
|IN||Invalid Card Number|
|5||Good Faith Investigation|
|AA||Does Not Recognize|
|CD||Credit/Debit Posted Incorrectly|
|NF||Non-Receipt of Cash from ATM|
|PM||Paid by Other Means|
|RG||Non-Receipt of Goods, Services, or Cash|
|RM||Cardholder Disputes Quality of Goods or Services|
|RN2||Credit Not Processed|
What are True Fraud chargebacks?
What are Friendly Fraud chargebacks?
What are Merchant Error chargebacks?
What is the EMV Liability Shift and how does it impact chargebacks?
Who is liable for chargebacks?
How do EMV chips impact chargebacks?
Are retail merchants liable for chargebacks?
Are Card-Not-Present Merchants liable for chargebacks?
The merchant will still be responsible for chargebacks arising due to customer service or merchant errors. 3D Secure Technology cannot be used by phone-order or mail-order merchants since the customer is not entering the order details in the system.
What is the chargeback threshold?
Should I dispute chargebacks?
Merchants should always look carefully at their chargebacks and represent as many as possible. It’s important to know where your chargebacks are coming from, and to be in the habit of responding and fighting them.
If you receive a chargeback that you believe is unfounded, you as a merchant have the right to dispute the chargeback. To do so, you’ll first need to submit a rebuttal letter to argue your case, along with a number of supporting documents and pieces of evidence.
Exactly what evidence you’ll need will depend on the exact reason code associated with your chargeback.
How do I write a chargeback rebuttal letter?
Depending on the credit or payment provider, you can write a letter or submit a form containing your dispute information package. This letter can outline your case and address the customers complaint.
A prompt rebuttal later can help you better address fraudulent chargebacks.
What is Chargeback Representment?
When a merchant disputes a cardholder chargeback (essentially disputes the dispute), then it enters representment. During this process, the merchant provides information regarding the transaction and why they believe that transaction was legitimate.
During this process, the merchant works with their sales department and/or their chargeback management company to build a dispute package. This package typically outlines the evidence and speaks to the issuing bank in a way that makes sense within their usually chargeback guidelines and frameworks.
Following this, the acquiring bank sends the information back through the credit card network to the issuing bank who makes the final decision and informs the involved parties.
Can you prevent all chargebacks?
Studying and fighting your chargebacks will help you learn why they’re happening to you, and addressing those root causes is by far the best thing you can do to prevent future chargebacks.
How long do I have to fight a chargeback?
If you plan to dispute a chargeback, it’s important to act quickly. Issuers often lag behind when notifying acquirers and merchants of chargebacks, so you may have a very small window in which to respond and every chargeback is different.
Having a chargeback representment team at your disposal can help you act swiftly and efficiently, no matter what the time frame may be.
How much are chargeback fees?
Chargebacks can often threaten your cash flow and put your merchant accounts at risk, too. They could even increase your merchant account costs or cause your accounts to be shut down, preventing you from accepting payments altogether.
When you understand what chargebacks are, you can fight them more effectively, learn from them, and take steps to reduce the chances that they will keep afflicting you. Even when choosing a chargeback management firm to deal with them for you, having a solid grounding in the facts about chargebacks will help you know whether that firm is providing you with a good return on your investment.
Regardless of your chargeback experience level with, Chargeback Gurus can guide you to the best possible outcomes for your company. For topic requests, questions or advice, please email us directly: email@example.com
Download your copy of the Chargebacks 101 Guide to better help you understand the causes of chargebacks, and how the overall chargeback process works so you can fight customer chargebacks and prevent them in the first place.