Merchants who receive a chargeback for a transaction placed with an American Express card may encounter reason code P04, which indicates a transaction that was not processed correctly by the merchant. The actual underlying cause of this chargeback is usually either merchant error or inadvertent friendly fraud. Merchants who believe they have received an invalid chargeback under reason code P04 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is American Express Chargeback Reason Code P04?
American Express chargeback reason code P04 falls under the “Processing Errors” category. The shorthand description is “Charge Processed as Credit.” This means that the cardholder was expecting a regular transaction to be processed to their account, but they received a credit of funds instead. While some customers might be happy to take the free money and run, others will have good cause to want to see the erroneous transaction corrected, and American Express will step in with this chargeback reason code if the mistake is brought to their attention.
This is a unique chargeback in that it doesn’t cost the merchant revenue—rather the opposite. However, it represents a significant error in transaction processing and merchants should carefully review any procedures that lead to mistakes such as this occurring.
This chargeback might not cost the merchant any revenue, but it still counts as a chargeback and may result in fees and other negative consequences.
What Scenarios Might Lead to This Chargeback?
In most cases, this chargeback is caused by merchant error. Instead of processing a regular transaction that debits the cardholder’s account, the merchant chooses the wrong option in their payment processing interface and runs the transaction as a refund instead. The result? Money is withdrawn from the merchant’s account and transferred to the cardholder as a credit.
This is an unusual chargeback to say the least, and it’s even possible to receive it as friendly fraud, unintentionally, if a customer is not expecting a refund and feels compelled to report a strange credit on their monthly statement to American Express. Of course, you should “fight” this chargeback and represent the credit if you receive it in error, as ignoring it can lead to further complications and customer disputes down the line once the customer realizes that they were supposed to receive a refund after all.
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?
If you receive this chargeback in error, the correct and ethical thing to do is represent it to American Express with evidence that shows that the transaction really was intended to be a refund. The following items may constitute compelling evidence:
- If the transaction was valid—meaning that it really was supposed to be a refund and not a charge—provide evidence that refutes the cardholder’s claim, such as a credit memo, correspondence that refers to a promised refund, or other documentary evidence that supports your position.
- If you have already processed a transaction to offset an erroneous credit, provide documentation of the new charge.
How Can Merchants Prevent this Chargeback Code?
Good transaction processing practices and staff training can help avoid this kind of chargeback situation. Review your procedures for processing credit and institute checks and safeguards to make sure you catch any accidentally-reversed transactions before processing is complete.
Up-to-date payment processing software should make it easy to see what mode you are processing a transaction in before anything is finalized.
These tips can help you avoid transaction processing errors:
- Be careful that you don’t accidentally process transactions that are supposed to have been voided or canceled.
- Double check all transaction receipts before they are deposited.
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.