MasterCard Chargeback Reason Code 4840: Fraud

chargeback reason code 4840Merchants who receive a chargeback for a transaction placed with a Mastercard card may encounter reason code 4840, which indicates an improperly authorized transaction that the cardholder does not believe they should be responsible for paying. This reason code is intended to deal primarily with merchant fraud, but it may also result from friendly fraud or merchant error. Merchants who believe they have received an invalid chargeback under reason code 4840 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.

What is Mastercard Chargeback Reason Code 4840?

Mastercard chargeback reason code 4840 falls under the “Fraud” category. The shorthand description is “Fraudulent Processing of Transactions.” This reason code is to be used when a cardholder places an authorized card-present transaction with a merchant, but receives one or more additional non-authorized transactions within the next fifteen minutes.

While the most common and persistent forms of credit card fraud may be third-party attacks in the ecommerce sphere, merchant fraud does still occur and can be remedied with chargebacks such as this.

Honest merchants, however, may still find themselves on the receiving end of this chargeback due to friendly fraud or erroneous transaction processing.

What Scenarios Might Lead to This Chargeback?

The true fraud case of this chargeback would be a merchant who obtains usable payment credentials through a legitimate transaction, then runs them again to process additional charges without authorization.

Merchants who must process multiple transactions for the same customer, within a short timeframe, may receive friendly fraud chargebacks with this reason code if the cardholder forgets that they authorized more than one charge. One example would be when a customer wants to purchase an additional item at checkout after they’ve already been rung up and charged, so the merchant processes a quick second transaction.

Merchant error is likely to be the most frequent source of these chargebacks. They can result from processing errors, or from the merchant failing to notify the customer that they were splitting up a sale into two or more transactions for whatever reason.

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

What are the Important Timeframes?

Mastercard recommends that its cardholders file their dispute within 120 calendar days of placing the transaction. The acquirer and/or merchant have 45 calendar days to respond to this chargeback after it is filed.

How Can Merchants Fight this Chargeback Code?

Merchants can fight this chargeback if the cardholder’s claims are false. Your chargeback response should include one or more of the following items:

  • Proof that each transaction was for a separate purchase, and that they were authorized by the cardholder.
  • Proof that the cardholder’s PIN was entered for each transaction and sent with the authorization request.
  • Documentation that explains the reason why multiple transactions were appropriate.
  • Evidence showing that the chargeback does not comply with Mastercard’s rules and is therefore invalid.
  • If you have already processed a refund for the transaction in question, provide documentation that proves you have credited the cardholder’s account.
  • If you have resolved the issue directly with the cardholder, provide proof, such as written correspondence, that proves they no longer wish to dispute the charge.

How Can Merchants Prevent this Chargeback Code?

Rule one for authorization-related chargebacks is simple: never process a transaction without requesting and receiving an authorization approval. That said, processing errors do occur. Incomplete transactions should be canceled out or voided to prevent anyone from accidentally submitting them. Train your staff in proper checkout and credit card handling procedure to minimize errors.

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

  • If you realize that you have processed a duplicate transaction, issue a reversal or credit immediately.
  • Double check all your transaction receipts before depositing them.
  • Only send one batch at a time.
  • When a customer wants to switch payments in the middle of a transaction, always cancel or void out the transaction in progress and start over.
  • If you need to run a card twice because something was left off the initial transaction, make sure the customer knows this and authorizes the second transaction.

About Mastercard 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.

Mastercard specifies 21 reason codes under the categories of Fraud, Authorization, Point-of-Interaction Error, and Cardholder Disputes. Mastercard uses a four-digit numbering scheme for its chargeback reason codes.

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.