Discover Chargeback Reason Code AA: Services

Table of Contents

1. What is Discover chargeback reason code AA?
2. What causes code AA chargebacks?
3. What's the time limit to respond to code AA chargebacks?
4. How can merchants fight code AA chargebacks?
5. How can merchants prevent code AA chargebacks?
6. About Discover chargeback reason codes

Merchants who receive a chargeback for a transaction placed with a Discover card may encounter reason code AA, 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 may be true fraud, friendly fraud, or merchant error. Merchants who believe they have received an invalid chargeback under reason code AA may be able to represent the transaction and reverse the chargeback with the right compelling evidence.

What is Discover chargeback reason code AA?

Discover chargeback reason code AA falls under the “Services” category. The shorthand description is “Does Not Recognize.” This reason code is assigned when a cardholder is granted a chargeback because they see a charge on their statement that they don’t recognize or don’t remember authorizing.

It's common for cardholders to contact their bank to question or dispute a charge because they don’t recognize it. This can happen for a variety of reasons, and the underlying reason for the chargeback may or may not be valid.

It is important for merchants to look at these chargebacks carefully and examine the transaction details and the cardholder’s order history to determine the true stories behind these chargebacks.

What causes code AA chargebacks?

Code AA chargebacks are often caused by the cardholder forgetting or failing to recognize a legitimate charge, but they can also be caused by fraud committed by a third party using stolen payment credentials.

Fraudsters have gotten smarter and more sophisticated over the years, and it is not uncommon for fraudsters to obtain stolen cards with full credentials, which they can use to place legitimate-seeming transactions that receive proper authorization responses. The fraud is only discovered when the cardholder reviews their statement and sees a transaction that they did not place.

When the cardholder calls their bank to report the transaction they don't recognize, they may be granted chargeback under this reason code.

Merchants also get a lot of friendly fraud chargebacks that bear this reason code. Sometimes, merchant error contributes to the problem. Some merchants will use a merchant descriptor—the text that shows up on card statements to identify the source of a charge—that references business entity names that are not the same as the name of the store the cardholder shopped at. They see these unfamiliar names and assume the transaction is fraudulent.

Friendly fraud may also occur when a family member uses the cardholder’s card without telling them. Even if the family member did not have permission to use the card in that particular instance, if they were allowed access to the card there is no legitimate basis for a code AA chargeback.

What's the time limit to respond to code AA chargebacks?

The acquirer or merchant has 30 days to respond to a chargeback filed under reason code AA.

How can merchants fight code AA chargebacks?

Merchants can fight code AA chargebacks if they can prove that the transaction in question was authorized by the cardholder.

Your chargeback response may include the following:

• Evidence that the cardholder received the goods or services paid for with the disputed transaction.
• Proof that the cardholder’s identity was verified at the time of the transaction and that authorization approval was received.
• Copies of the card imprint and/or signature or PIN entry.
• If a refund has already been provided for the disputed transaction, provide proof that you have credited the cardholder’s account.

How can merchants prevent code AA chargebacks?

Because many different scenarios can lead to code AA chargebacks, it takes a multi-pronged approach to prevent it. For a start, using a recognizable billing descriptor and effective fraud prevention tools will prevent many of these chargebacks.

Keep in mind that some customers will falsely claim not to recognize a charge simply to avoid paying for a product or service they are unhappy with.

The following best practices can help you avoid this kind of chargeback:

• Use anti-fraud tools such as AVS/CVV verification and 3-D Secure.
• Use clear and recognizable merchant descriptors. Include your phone number and website URL in the descriptor, if possible. You can contact your payment processor to update this information.
• Provide attentive and accessible customer service and offer prompt refunds when a customer reaches out to you with a problem.

About Discover 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 if 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, Discover specifies 26 reason codes under the categories of Fraud, Not Classified, Authorization, Expired, Processing Errors, Services, and Dispute Compliance. Most of Discover’s reason codes are a two-letter abbreviation of the dispute description.

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.

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