Merchants who receive a chargeback for a transaction placed with an American Express card may encounter reason code A01, which indicates an improperly authorized transaction that the cardholder does not believe they should be responsible for paying. The actual underlying cause of this chargeback is often either friendly fraud or merchant error. Merchants who believe they have received an invalid chargeback under reason code A01 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is American Express Chargeback Reason Code A01?
American Express chargeback reason code A01 falls under the “Authorization” category. The shorthand description is “Charge Amount Exceeds Authorization Amount.” This means that while the cardholder did knowingly initiate a transaction with the merchant, the merchant charged the card for a higher amount than what was agreed upon and authorized.
An authorization request must include a purchase amount, and the authorization only allows you to charge the customer’s card up to that amount.
This prevents unethical merchants from raising prices after the customer supplies their card and stops them from adding fees and other charges that the customer did not agree to pay.
What Scenarios Might Lead to This Chargeback?
There are situations in which a merchant might obtain authorization for a payment before the final purchase amount is determined. This is not uncommon at gas stations and restaurants, for example. Exceptions are necessary for these merchants because they cannot predict how much fuel the customer will pump, or how much of a tip they might decide to leave their server.
However, merchants in these categories have guidelines to follow for processing these transactions that allow them some headroom to accommodate variable purchase amounts. This chargeback reason code is appropriate when a merchant submits a charge that exceeds any applicable guidelines and is more than what the customer agreed to pay.
This reason code may be used for friendly fraud when a cardholder knows that they cannot plausibly claim that a transaction was fraudulently carried out by a third party. Instead, they may assert that the merchant improperly overcharged them.
What are the Important Timeframes?
The acquirer and/or merchant have 20 days to respond to this chargeback after it is filed. No special timeframes apply to the cardholder.
How Can Merchants Fight this Chargeback Code?
Merchants can fight this chargeback if the cardholder’s claims are false. Your chargeback response must include at least one of the following elements:
- If you processed the transaction correctly and the amount was agreed to by the cardholder, provide an authorization approval for the full amount, or proof that the purchase qualified as an exception to the rule.
- If you have already processed a refund for the transaction in question, provide documentation that proves you have credited the cardholder’s account.
How Can Merchants Prevent this Chargeback Code?
Obtaining proper authorization before completing a transaction is essential if you want to protect yourself from customer disputes and chargebacks. If the agreed-upon sale price changes during the course of a transaction, submit a new authorization request for the new purchase price before proceeding any further. When tips, donations, or other variables have the potential to increase a transaction amount after the fact, follow the appropriate guidelines to ensure you submit an authorization that will allow for such adjustments.
The following best practices can help you avoid this kind of chargeback:
- Never change the amount of a transaction once authorization has been requested and approved. If the price changes, cancel the transaction and submit a new authorization request.
- If you add gratuities to your transactions, make sure you know what the acceptable upper limit is and do not exceed it. Customers who leave extraordinarily generous tips may regret their decision after the fact and attempt to dispute the charge—when possible, confirm these customers’ intentions and submit a new authorization request for the final amount.
About American Express Chargeback Reason Codes
Reason codes are alphanumeric codes that provide the justification for granting a chargeback. Pursuant to the Fair Credit Billing Act of 1974, cardholders have the right to dispute unauthorized or erroneous charges and issuing banks must reverse a disputed transaction of the cardholder’s claim is valid.
When a cardholder contacts their issuing bank to dispute a transaction and receive a chargeback, the dispute is assigned a reason code that most closely matches the substance of the cardholder’s claims. The reason code provides the merchant and other stakeholders in the dispute with a concise explanation for why a chargeback has been granted.
Each card network—Visa, Mastercard, American Express, and Discover—defines and maintains their own unique set of reason codes, which are applied to disputes by the banks that issue credit and debit cards under their brands.
As both a card network and an issuer, American Express specifies 34 reason codes under the categories of Fraud, Authorization, Processing Errors, Card Member Disputes, and Inquiry/Miscellaneous. Each American Express reason code consists of one or more letters, indicating the category, and a number that identifies the specific dispute reason.
Understanding chargeback reason codes is one of the most essential parts of effective chargeback management. Identifying the chargeback reason code and the evidence required to fight it is the first step in chargeback representment, and analyzing your chargeback reason codes can provide you with insights into what types of disputes are causing you the most trouble. With this information, you can determine the root causes of your chargebacks and take action to prevent them from reoccurring.