American Express Chargeback Reason Code C02: Card Member Disputes

chargeback reason code c02Merchants who receive a chargeback for a transaction placed with an American Express card may encounter reason code C02, which indicates a disputed transaction that the cardholder does not believe they should be responsible for paying. The actual underlying cause of this chargeback is usually either friendly fraud or merchant error. Merchants who believe they have received an invalid chargeback under reason code C02 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.

What is American Express Chargeback Reason Code C02?

American Express chargeback reason code C02 falls under the “Card Member Disputes” category. The shorthand description is “Credit Not Processed.” Here the cardholder is claiming that you were supposed to provide them with a refund, but no credit has yet been applied to their card account.

This is a fairly common chargeback reason that can result from miscommunications, unresponsive customer service, outright fraud, and many other circumstances. It is also a fairly easy chargeback to prevent and avoid, when it isn’t being filed in bad faith.

When you promise a credit or refund to the customer, the best thing to do is to always process it as soon as you possibly can.

What Scenarios Might Lead to This Chargeback?

The most obvious scenario that causes this chargeback is when a merchant tells a customer they’re going to be getting a refund, but they fail to process a credit because of unforeseen delays. They might be understaffed, or misplace the paperwork, or simply forget—the specific reason doesn’t really matter; if enough time has passed and no refund is forthcoming, the customer has the right to demand a chargeback.

Friendly fraudsters often try to file disputes under this reason code. Sometimes they’re simply lying about having been promised a refund, but at other times they ask for this chargeback because they’ve gotten impatient or haven’t noticed that the credit was already processed.

Get the guide, Chargebacks 101: Understanding Chargebacks & Their Root Causes

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, meaning that you have either already provided a credit, or no credit is actually due. In your chargeback response, include at least one of the following items as evidence:

  • If the cardholder is not entitled to a credit, or only a partial credit is necessary, provide documentation (such as correspondence, receipts, or a credit memo) that supports your claim.
  • 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?

The surest way to avoid a chargeback on these grounds is to process credits and provide promised refunds to your customers immediately. If you tell a customer to expect a refund, and for some reason the refund will be delayed or the amount adjusted for any reason, communicate this to them right away.

Train and encourage your customer service team to respond promptly to customers issues that may necessitate a refund and to be accurate and realistic when they tell customers when they can expect to see a credit on their statement. 

  • Make sure your refund or cancelation policy clearly outlines what steps the cardholder needs to take to receive a credit, and make the policy easy to find and comprehend.
  • Adhere to any promises you make to provide a credit or refund, especially if a timeframe is mentioned.
  • Fulfill all qualified cancelations or refund requests promptly, so that the credit will appear on the cardholder’s next monthly statement.
  • If you will be crediting the cardholder for a reduced or partial amount, notify the cardholder of the difference so they will know exactly what to expect before you process the credit.

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.